<PAGE>
VARIABLE ANNUITY ACCOUNT C
Supplement for Participants in the University of Texas Defined Contribution Plan
Supplement dated September 11, 1995
to Prospectus dated May 1, 1995
AETNAPLUS - GROUP VARIABLE ANNUITY CONTRACTS
FOR TAX-DEFERRED ANNUITY PLANS (SECTION 403(B)) AND
DEFINED CONTRIBUTION PLANS (SECTION 401(A))
The following information supplements the information contained in the
Prospectus dated May 1, 1995 and should be read with that Prospectus.
. Pursuant to the last paragraph of "Charges and Deductions - Deferred Sales
Charge" (page 26) regarding reduction or elimination of the deferred sales
charge, no deferred sales charge will be assessed on surrenders attributable
to any contributions deducted from payroll on or after September 1, 1995 from
new or existing Participants in the University of Texas Defined Contribution
Plan (the "University of Texas Plan"). Contributions deducted from payroll
before that date will continue to be subject to a deferred sales charge.
. Pursuant to the last paragraph of the "Charges and Deductions - Maintenance
Fee" (page 23-24) regarding reduction or elimination of the maintenance fee,
the maintenance fee will no longer be deducted for new or existing
Participants in the University of Texas Plan.
. For new and existing Participants in the University of Texas Plan,
contributions deducted from payroll on or after September 1, 1995 may not be
allocated to the Fixed Account, nor may assets attributable to such
contributions be transferred to the Fixed Account. Contributions and transfers
will continue to be accepted into the Fixed Plus Account. Participants with
allocations to the Fixed Account will automatically have such allocations
redirected to the Fixed Plus Account unless the Participant notifies us
otherwise. Until October 31, 1995, the 20% limit on transfers or withdrawals
from the Fixed Plus Account described in Appendix III will be waived with
respect to such redirected allocations.
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
151 Farmington Avenue, Annuity Operations, Hartford, Connecticut 06156,
Telephone: 1-800-525-4225
VARIABLE ANNUITY ACCOUNT C
Prospectus Dated: May 1, 1995
AETNAPLUS -- GROUP VARIABLE ANNUITY CONTRACTS FOR TAX-DEFERRED ANNUITY PLANS
(SECTION 403(B)) AND
DEFINED CONTRIBUTION PLANS (SECTION 401(A))
This Prospectus describes group deferred variable annuity contracts issued by
Aetna Life Insurance and Annuity Company (the "Company"). The Contract allows
lump-sum payments and installment payments. See "Contract Purchase." The
Contracts are designed to fund Plans ("Plans") adopted by public school systems
and certain tax-exempt organizations (Section 501(c)(3) organizations) for
their employees under Section 403(b) ("403(b)") of the Internal Revenue Code of
1986, as amended ("Code") and for qualified defined contribution plans under
Section 401(a) of the Code. Amounts held under the Contracts may be entitled to
tax-deferred treatment under certain sections of the Code.
The Contracts allow values to accumulate under credited interest or variable
options, or a combination of these options. They also provide for the payment
of annuity benefits on a fixed or variable basis, or a combination thereof.
The variable funding options currently available through the Separate Account
under the Contract described in this Prospectus are as follows:
<TABLE>
<S> <C>
. Aetna Variable Fund . Fidelity Overseas Portfolio
. Aetna Income Shares . Franklin Government Securities Trust
. Aetna Variable Encore Fund . Janus Aspen Aggressive Growth Portfolio
. Aetna Investment Advisers Fund, Inc. . Janus Aspen Balanced Portfolio
. Aetna Ascent Variable Portfolio . Janus Aspen Flexible Income Portfolio
. Aetna Crossroads Variable Portfolio . Janus Aspen Growth Portfolio
. Aetna Legacy Variable Portfolio . Janus Aspen Short-Term Bond Portfolio
. Alger American Growth Portfolio . Janus Aspen Worldwide Growth Portfolio
. Alger American Small Cap Portfolio . Lexington Natural Resources Trust
. Calvert Responsibly Invested Balanced Portfolio . Neuberger & Berman Growth Portfolio
. Fidelity Contrafund Portfolio . Scudder International Portfolio
. Fidelity Equity-Income Portfolio . TCI Growth (a Twentieth Century Fund)
. Fidelity Growth Portfolio
</TABLE>
--------
The availability of the above Funds is subject to applicable regulatory
authorization. Not all Funds are available in all jurisdictions or under all
Contracts. Please check with your employer to determine option availability.
The credited interest options available for the accumulation of values are the
Guaranteed Accumulation Account, the Fixed Account and the Fixed Plus Account.
The Guaranteed Accumulation Account, the Fixed Account and the Fixed Plus
Account are offered only in those jurisdictions in which they are approved.
Except as specifically mentioned, this prospectus describes only the variable
options of the Contracts. Information concerning the Guaranteed Accumulation
Account, the Fixed Account and the Fixed Plus Account is found in Appendix I,
Appendix II and Appendix III in this Prospectus.
This Prospectus sets forth concisely the information about Variable Annuity
Account C (the "Separate Account") that a prospective investor should know
before investing. Additional information about the Separate Account is
contained in a Statement of Additional Information ("SAI") dated May 1, 1995,
which has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Table of Contents for the SAI is printed
in this Prospectus. An SAI may be obtained without charge by indicating your
request on the enrollment form or on the prospectus receipt contained in this
Prospectus or calling 1-800-525-4225.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERS CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
DEFINITIONS.......................... 3
PROSPECTUS SUMMARY................... 5
FEE TABLE............................ 6
CONDENSED FINANCIAL INFORMATION...... 9
PERFORMANCE DATA..................... 11
THE COMPANY.......................... 12
VARIABLE ANNUITY ACCOUNT C........... 12
THE FUNDS............................ 12
Fund Investment Advisers............ 15
Mixed and Shared Funding............ 16
Fund Additions Limitations and
Substitutions...................... 16
PURCHASE
Contract Purchase................... 16
Net Purchase Payments............... 17
Distribution........................ 17
DETERMINING CONTRACT VALUE
Accumulation Units.................. 18
Net Investment Factor............... 18
Transfer Credits.................... 19
CONTRACT RIGHTS
Right to Cancel..................... 19
Rights Under the Contract........... 19
Transfers and Allocation
Changes............................ 19
Withdrawals......................... 19
Withdrawal Restrictions ............ 20
Reinvestment Privilege ............. 21
Contract Loans...................... 21
Restrictions Under the Texas
Optional Retirement Program........ 22
CHARGES AND DEDUCTIONS
Maintenance Fee..................... 23
Mortality and Expense Risk
Charges............................ 24
Administrative Expense Charge....... 24
Fund Expenses....................... 24
Deferred Sales Charge............... 24
Premium Tax......................... 26
Contract Loans...................... 26
ADDITIONAL WITHDRAWAL OPTIONS........ 27
General............................. 27
Estate Conservation Option.......... 27
Systematic Withdrawal Option........ 28
ANNUITY PERIOD
Annuity Period Elections............ 28
Annuity Options..................... 30
DEATH BENEFIT........................ 31
Accumulation Period................. 31
Annuity Period...................... 31
TAX STATUS
Introduction........................ 32
Taxation of the Company............. 32
Tax Status of the Contract.......... 32
Contracts Used with Certain
Retirement Plans................... 33
Possible Changes in Taxation........ 34
Other Tax Consequences.............. 34
MISCELLANEOUS
Voting Rights....................... 35
Modification of the Contract........ 35
Contract Holder/Participant
Inquiries.......................... 36
Telephone Transfers................. 36
Beneficiary Designations............ 36
Transfer of Ownership; Assignment... 36
Legal Proceedings................... 37
Legal Matters....................... 37
STATEMENT OF ADDITIONAL
INFORMATION --TABLE OF CONTENTS...... 38
APPENDIX I--Guaranteed Accumulation
Account............................. 39
APPENDIX II--Fixed Account........... 40
APPENDIX III--Fixed Plus Account..... 41
APPENDIX IV--401(a) Defined
Contribution Plans.................. 43
HYPOTHETICAL TABLES.................. 45
</TABLE>
2
<PAGE>
DEFINITIONS
As used in this Prospectus, the following terms have the meanings shown:
ACCOUNT: A record established for each Participant to identify Contract values
accumulated on the Participant's behalf during the Accumulation Period.
ACCOUNT VALUE: The dollar value of amounts held in an Account as of any
Valuation Period, including the value of the Accumulation Units in the Funds,
the amounts held in GAA, any amounts invested in the Fixed Account and any
amounts invested in the Fixed Plus Account, plus interest earned on those
amounts, less any maintenance fees due, but excluding amounts used for Annuity
Options.
ACCOUNT YEAR: The period of 12 months measured from the Account's Effective
Date or from an anniversary of such Effective Date.
ACCUMULATION PERIOD: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.
ACCUMULATION UNIT: A measure of the value of the Separate Account assets
attributable to each Fund used as a variable funding option.
AGGREGATE PURCHASE PAYMENT(S): The sum of all Purchase Payment(s) made under a
Contract.
ANNUITANT: A natural person on whose life an Annuity payment is based.
ANNUITY: A series of payments for life, a definite period or a combination of
the two.
ANNUITY PERIOD: The period during which Annuity payments are made.
ANNUITY UNIT: A measure of the value attributable to each Fund selected during
the Annuity Period.
CODE: Internal Revenue Code of 1986, as amended.
COMPANY: Aetna Life Insurance and Annuity Company, sometimes referred to as
"we" or "us."
CONTRACT: The group deferred, variable annuity contracts offered by this
Prospectus.
CONTRACT HOLDER: The entity to which the Contract is issued. The Contract
Holder is usually the employer.
CONTRACT YEAR: The period of 12 months measured from the Contract's Effective
Date or from any anniversary of such Effective Date.
DISTRIBUTOR(S): The registered broker-dealer(s) which have entered into selling
agreements with the Company to offer and sell the Contracts. The Company may
also serve as a Distributor.
EFFECTIVE DATE: The date the Company accepts and approves the Contract
application or enrollment form, as applicable.
ERISA: Employee Retirement Income Security Act of 1974.
FUNDS: The mutual funds offered as variable funding options for the investment
of assets of the Separate Account under the Contracts.
GAA: Guaranteed Accumulation Account, the credited interest option available in
certain jurisdictions for deposits under the Contract.
3
<PAGE>
HOME OFFICE: The Company's principal executive offices, located at 151
Farmington Avenue, Hartford, Connecticut 06156.
MARKET VALUE ADJUSTMENT: An amount deducted or added to amounts withdrawn early
from the Guaranteed Accumulation Account to reflect changes in the market value
of the investment since the date of deposit. See Appendix I and the prospectus
for the Guaranteed Accumulation Account for a discussion of how the market
value adjustment is actually calculated.
NET PURCHASE PAYMENT(S): The Purchase Payment(s) less premium taxes, if
applicable.
PARTICIPANT: An eligible person participating in a Plan maintained by the
Contract Holder, referred to as "you."
PLAN(S): Tax-deferred retirement plans under Section 403(b) of the Code for
employees of public school systems and certain tax-exempt organizations
(Section 501(c)(3) organizations) and defined contribution plans under Section
401(a) of the Code.
PURCHASE PAYMENT(S): The gross payment(s) made to the Company under a Contract.
PURCHASE PAYMENT PERIOD: For installment Purchase Payment Contracts, the period
of time for completion of the agreed upon annual number and amount of Purchase
Payments. For example, if it is determined that the Purchase Payment Period
will consist of 12 payments per year and only 11 payments are made, the
Purchase Payment Period is not completed until the twelfth Purchase Payment is
made. When a particular remittance is intended to include more than one regular
Purchase Payment, we will credit the number of Purchase Payments represented by
such remittance in determining the Purchase Payment Period. However, the number
of completed Purchase Payment Periods may never be greater than the number of
full calendar years since the date an Account is established under the
Contract.
SEC: Securities and Exchange Commission
SEPARATE ACCOUNT: Variable Annuity Account C, an account that segregates assets
from other assets of the Company. The Separate Account holds shares of the
Funds acquired for the Contracts. The Company holds title to the assets held in
the Separate Account.
UNDERWRITER: The registered broker-dealer which contracts with other registered
broker-dealers on behalf of the Separate Accounts to offer and sell the
Contracts.
VALUATION PERIOD: The period of time from when a Fund determines its net asset
value until the next time it determines its net asset value, usually from 4:15
p.m. Eastern time, each day the New York Stock Exchange is open, until 4:15
p.m. the next such business day.
VALUATION RESERVE: A reserve established pursuant to the insurance laws of
Connecticut to measure voting rights during the Annuity Period and the value of
a commutation right available under the "Payments for a Specified Period"
nonlifetime Annuity option when elected on a variable basis under the Contract.
VARIABLE ANNUITY CONTRACT: An Annuity Contract providing for the accumulation
of values and/or for Annuity payments which vary in dollar amount with
investment results.
4
<PAGE>
PROSPECTUS SUMMARY
CONTRACTS OFFERED
The two Contracts described in this prospectus are group, deferred, variable
annuity contracts. One allows lump-sum payments and the other allows
installment payments. See "Purchase--Contract Purchase," "Contract Rights" and
"Miscellaneous."
The Contracts are designed to accumulate values and provide you with retirement
benefits under tax-deferred annuity Plans adopted by public school systems and
certain tax-exempt organizations (Section 501(c)(3) organizations) for their
employees under Section 403(b) ("403(b)"). The Contract Holder must notify us
of the applicability of Title I of the Employee Retirement Income Security Act
of 1974 ("ERISA"), as amended by subsequent law, including the Retirement
Equity Act of 1984, to the Plan. The Contracts may also be used in connection
with qualified defined contribution plans under Section 401(a) of the Code. See
Appendix IV.
PURCHASE
The Contracts may be purchased by eligible organizations on behalf of a group
made up of their employees. Eligible employees may participate in the Contract
by completing an enrollment form (and any other required forms) and submitting
it to the Company with an initial Purchase Payment. Purchase Payments are made
by salary reduction or by lump sum payments from an eligible, existing plan.
See "Purchase."
REDEMPTION
You may redeem all or a portion of your Account Value during the Accumulation
Period by properly completing the Company's disbursement form and sending it to
the Company. Certain charges and deductions may be assessed upon withdrawal.
See "Charges and Deductions" and "Contract Rights--Withdrawals." Limitations
apply to withdrawals from the Fixed Plus Account. (See Appendix III.) The Code
restricts full and partial withdrawals in certain circumstances. (See "Contract
Rights--Withdrawal Restrictions.")
DEFERRED SALES CHARGES
Amounts withdrawn may be subject to a deferral sales charge. The maximum
deferred sales charge that could be assessed on a full or partial withdrawal is
5% of the amount withdrawn. See "Charges and Deductions--Deferred Sales
Charge." Amounts withdrawn from GAA may be subject to a market value
adjustment. (See Appendix I.)
TAXES AND WITHHOLDING
A 10% federal tax penalty and a 20% withholding for income tax may be imposed
on certain withdrawals. See "Tax Status--Contracts Used with Certain Retirement
Plans." For a discussion of taxes and withholding for defined contribution
plans under Section 401(a) of the Code, see Appendix IV.
CONTRACT CHARGES
Certain charges are associated with these Contracts, for example, mortality and
expense risk charges, administrative expense charges and maintenance fees. The
Funds are also subject to certain fees and expenses. Purchase Payments may also
be subject to premium taxes. See "Charges and Deductions" for a complete
explanation of these charges.
FREE LOOK PROVISION
Participants and Contract Holders have the right to cancel their Certificate or
Contract (as applicable) within 10 days after receipt (or as otherwise allowed
by state law) by returning it to the Company along with a written notice of
cancellation. Unless state law requires otherwise, the amount you will receive
on cancellation under this provision may reflect the investment performance of
the Purchase Payments deposited in the separate account while invested. In
certain cases, this may be less than the amount of your Purchase Payments. See
"Contract Rights--Right to Cancel."
5
<PAGE>
FEE TABLE
(Based on year ended December 31, 1994)
THE PURPOSE OF THE FEE TABLE IS TO ASSIST CONTRACT HOLDERS IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT WILL BE BORNE, DIRECTLY OR INDIRECTLY, UNDER
THE CONTRACT. THE INFORMATION LISTED REFLECTS THE CHARGES DUE UNDER THE
CONTRACT AS WELL AS THE FEES AND EXPENSES DEDUCTED FROM THE FUNDS. ADDITIONAL
INFORMATION REGARDING THE CHARGES AND DEDUCTIONS ASSESSED UNDER THE CONTRACT
CAN BE FOUND UNDER "CHARGES AND DEDUCTIONS" IN THIS PROSPECTUS. CHARGES AND
EXPENSES SHOWN DO NOT TAKE INTO ACCOUNT PREMIUM TAXES THAT MAY BE APPLICABLE.
FOR MORE INFORMATION REGARDING EXPENSES PAID OUT OF THE ASSETS OF A PARTICULAR
FUND, SEE THE FUND'S PROSPECTUS.
<TABLE>
<CAPTION>
CONTRACT HOLDER TRANSACTION EXPENSES
------------------------------------
DEFERRED SALES CHARGE (as a percentage of amount withdrawn)(/1/):
INSTALLMENT PURCHASE PAYMENT CONTRACT
(based on Completed Purchase
Payment Periods) Deduction
---------------------------- ----------
<S> <C>
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or 10 2%
more than 10 0%
</TABLE>
<TABLE>
<CAPTION>
SINGLE PURCHASE PAYMENT CONTRACT
(based on Account Years
Completed) Deduction
----------------------- ---------
<S> <C>
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
</TABLE>
ANNUAL CONTRACT MAINTENANCE FEE(/2/)
-------------------------------
Installment Purchase Payment Contract $20.00 per Account
Single Purchase Payment Contract 0.00
SEPARATE ACCOUNT ANNUAL EXPENSES
--------------------------------
(Daily deductions, equal to the percentage shown on an annual basis, made from
amounts allocated to the variable options)
Mortality and Expense Risk Fees 1.25%
Administrative Expense Charge(/3/) 0%
-----
Total Separate Account Annual Expenses 1.25%
=====
(/1/) The Total amount deducted for the deferred sales charge will not exceed
8.5% of the total Purchase Payments actually made to the Account. The
deferred sales charge may be referred to in the Contract as a "surrender
fee." See "Charges and Deductions--Deferred Sales Charge" in this
Prospectus for instances in which this charge is not deducted.
(/2/) This fee is $15.00 per Account for those Plans where annual Aggregate
Purchase Payments are expected to be in excess of $100,000 and the
sponsoring employer has agreed to accommodate group meetings on its
premises for soliciting potential Participants. See "Charges and
Deductions--Maintenance Fee" for more information.
(/3/) We currently do not impose an Administrative Expense Charge. However, we
reserve the right to deduct a daily charge of not more than 0.25% per year
from the portion of contract values held in the Separate Account.
6
<PAGE>
MUTUAL FUND ANNUAL EXPENSES
---------------------------
(Except as noted, the following figures are a percentage of average net assets
and, except where otherwise indicated, are based on figures for the year ended
December 31, 1994)
<TABLE>
<CAPTION>
INVESTMENT TOTAL
ADVISORY OTHER MUTUAL
FEES(/1/) EXPENSES(/2/) FUND
(AFTER EXPENSE (AFTER EXPENSE ANNUAL
REIMBURSEMENT) REIMBURSEMENT) EXPENSES
-------------- -------------- --------
<S> <C> <C> <C>
Aetna Variable Fund 0.25% 0.05% 0.30%
Aetna Income Shares 0.25% 0.08% 0.33%
Aetna Variable Encore Fund 0.25% 0.07% 0.32%
Aetna Investment Advisers Fund, Inc. 0.25% 0.07% 0.32%
Aetna Ascent Variable Portfolio(/3/) 0.50% 0.20% 0.70%
Aetna Crossroads Variable Portfolio(/3/) 0.50% 0.20% 0.70%
Aetna Legacy Variable Portfolio(/3/) 0.50% 0.20% 0.70%
Alger American Growth Portfolio 0.75% 0.11% 0.86%
Alger American Small Cap Portfolio 0.85% 0.11% 0.96%
Calvert Responsibly Invested Balanced
Portfolio 0.70% 0.10% 0.80%
Fidelity Contrafund Portfolio(/3/) 0.62% 0.27% 0.89%
Fidelity Equity-Income Portfolio 0.52% 0.06% 0.58%
Fidelity Growth Portfolio 0.62% 0.07% 0.69%
Fidelity Overseas Portfolio 0.77% 0.14% 0.91%
Franklin Government Securities Trust(/4/) 0.47% 0.16% 0.63%
Janus Aspen Aggressive Growth
Portfolio(/5/) 0.77% 0.28% 1.05%
Janus Aspen Balanced Portfolio(/5/) 0.83% 0.74% 1.57%
Janus Aspen Flexible Income Portfolio(/5/) 0.30% 0.70% 1.00%
Janus Aspen Growth Portfolio(/5/) 0.66% 0.22% 0.88%
Janus Aspen Short-Term Bond Portfolio(/5/) 0.00% 0.65% 0.65%
Janus Aspen Worldwide Growth Portfolio(/5/) 0.69% 0.49% 1.18%
Lexington Natural Resources Trust(/6/) 1.00% 0.55% 1.55%
Neuberger & Berman Growth Portfolio(/7/) 0.79% 0.12% 0.91%
Scudder International Portfolio 0.88% 0.20% 1.08%
TCI Growth(/8/) 1.00% 0.00% 1.00%
</TABLE>
--------
(/1/) Certain of the unaffiliated Fund advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds
as variable funding options under the Contract. These reimbursements are
paid out of the investment advisory fees and are not charged to investors.
(/2/) A Fund's "Other Expenses" include operating costs of the Fund. The
deduction of the above expenses are reflected in the Fund's net asset
value and are not deducted from the Account Value under the Contract.
(/3/) These Funds have only limited operating history; therefore the expenses
are estimated for the current fiscal year.
(/4/) The investment adviser for the Franklin Government Securities Trust has
agreed to reduce the investment advisory fee and to reimburse the Fund for
certain expenses. Without this agreement, the other expenses would have
been 0.63% and total annual expenses for the Franklin Government
Securities Trust would have been 0.78%.
(/5/) The expense figures shown are net of certain expense waivers from Janus
Capital Corporation. Without such waivers, the Investment Advisory Fees,
Other Expenses and Total Mutual Fund Annual Expenses for the Portfolios
for the fiscal year ended December 31, 1994 would have been: 0.65% 0.28%
and 1.28%, respectively, for Janus Aspen Aggressive Growth Portfolio;
1.00%, 0.74% and 1.74%, respectively, for Janus Aspen Balanced Portfolio;
0.65%, 0.70% and 1.35%, respectively, for Janus Aspen Flexible Income
Portfolio; 1.00%, 0.22% and 1.22%, respectively, for Janus Aspen Growth
Portfolio; 0.65%, 0.75% and 1.40%, respectively, for Janus Aspen Short-
Term Bond Portfolio; and 1.00%, 0.49% and 1.49%, respectively, for Janus
Aspen Worldwide Growth Portfolio.
(/6/) These fees as a percentage of assets are higher than those for other
similar funds, although the amounts of the fees are not due to the limited
amount of assets in the Fund.
(/7/) Until May 1, 1995, the Portfolio had a Distribution Plan pursuant to Rule
12b-1 which provided for the reimbursement by Neuberger & Berman
Management of certain distribution expenses, up to a maximum of 0.25% on
an annual basis of the Portfolio's average daily net assets. The "Total
Annual Expenses" shown above would have been increased by 0.02% for each
portfolio if the 12b-1 fees for the months of January through April, 1995
were taken into account.
(/8/) The Portfolio's investment adviser pays all expenses of the Portfolio
except brokerage commissions, taxes, interest, fees and expenses of the
non-interested directors (including counsel fees) and extraordinary
expenses.
7
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
Assuming a 5% annual return on assets, you would have paid the following
expenses on a $1,000 investment:(/1/)
<TABLE>
<CAPTION>
If you withdraw your entire If you do not withdraw your
Account Value at the end of the entire Account Value or if you
applicable time period: annuitize:
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund $69 $108 $149 $197 $17 $53 $ 91 $197
Aetna Income Shares $69 $109 $151 $201 $17 $53 $ 92 $201
Aetna Variable Encore
Fund $69 $108 $150 $199 $17 $53 $ 92 $199
Aetna Investment
Advisers Fund, Inc. $69 $108 $150 $199 $17 $53 $ 92 $199
Aetna Ascent Variable
Portfolio $72 $119 $169 $240 $21 $65 $111 $240
Aetna Crossroads
Variable Portfolio $72 $119 $169 $240 $21 $65 $111 $240
Aetna Legacy Variable
Portfolio $72 $119 $169 $240 $21 $65 $111 $240
Alger American Growth
Portfolio $74 $124 $177 $256 $23 $70 $119 $256
Alger American Small Cap
Portfolio $75 $127 $181 $266 $24 $73 $124 $266
Calvert Responsibly
Invested
Balanced Portfolio $73 $122 $174 $250 $22 $68 $116 $250
Fidelity Contrafund
Portfolio $74 $125 $178 $259 $23 $71 $121 $259
Fidelity Equity-Income
Portfolio $71 $116 $163 $227 $20 $61 $105 $227
Fidelity Growth
Portfolio $72 $119 $168 $239 $21 $64 $111 $239
Fidelity Overseas
Portfolio $74 $125 $179 $261 $23 $71 $122 $261
Franklin Government
Securities Trust $72 $117 $166 $233 $20 $63 $108 $233
Janus Aspen Aggressive
Growth Portfolio $76 $129 $186 $275 $24 $75 $129 $275
Janus Aspen Balanced
Portfolio $81 $144 $210 $326 $30 $91 $155 $326
Janus Aspen Flexible
Income Portfolio $75 $128 $183 $270 $24 $74 $126 $270
Janus Aspen Growth
Portfolio $74 $124 $178 $258 $23 $70 $120 $258
Janus Aspen Short-Term
Bond Portfolio $72 $118 $167 $234 $20 $63 $109 $234
Janus Aspen Worldwide
Growth Portfolio $77 $134 $193 $288 $26 $79 $135 $288
Lexington Natural
Resources Trust $81 $143 $209 $324 $29 $90 $154 $324
Neuberger & Berman
Growth Portfolio $74 $125 $179 $261 $23 $71 $122 $261
Scudder International
Portfolio $76 $130 $187 $278 $25 $76 $130 $278
TCI Growth $75 $128 $183 $270 $24 $74 $126 $270
</TABLE>
-------
(/1/)The illustration reflects the $20 annual maintenance fee as an annual
charge of 0.117% of assets.
8
<PAGE>
CONDENSED FINANCIAL INFORMATION
(SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD)
THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE YEARS IN
THE TEN-YEAR PERIOD ENDED DECEMBER 31, 1994 (AS APPLICABLE), IS DERIVED FROM
THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH FINANCIAL STATEMENTS
HAVE BEEN AUDITED BY KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS. THE FINANCIAL
STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1994 AND THE INDEPENDENT
AUDITORS' REPORT THEREON, ARE INCLUDED IN THE STATEMENT OF ADDITIONAL
INFORMATION.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $11.020 $10.454 $97.165 $77.845 $76.311
Value at end of period $10.778 $11.020 $10.454(/2/) $97.165 $77.845
Increase (decrease) in value of
accumulation unit(/1/) (2.20)% 5.41% (/2/) 24.82% 2.01%
Number of accumulation units
outstanding at end of period 114,733,035 44,166,470 21,250 20,948,226 18,362,906
AETNA INCOME SHARES
Value at beginning of period $10.905 $10.068 $36.789 $31.192 $28.943
Value at end of period $10.360 $10.905 $10.068(/3/) $36.789 $31.192
Increase (decrease) in value of
accumulation unit(/1/) (5.00)% 8.31% (/3/) 17.94% 7.77%
Number of accumulation units
outstanding at end of period 11,713,354 4,084,142 3,870 7,844,412 6,984,793
AETNA VARIABLE ENCORE FUND
Value at beginning of period $10.241 $10.048 $33.812 $32.138 $30.012
Value at end of period $10.528 $10.241 $10.048(/4/) $33.812 $32.138
Increase (decrease) in value of
accumulation unit(/1/) 2.80% 1.92% (/4/) 5.21% 7.08%
Number of accumulation units
outstanding at end of period 7,673,528 2,766,044 825 8,430,082 10,220,110
AETNA INVESTMENT
ADVISERS FUND, INC.
Value at beginning of period $11.057 $10.189 $12.736 $10.896 $10.437
Value at end of period $10.868 $11.057 $10.189(/6/) $12.736 $10.896
Increase (decrease) in value of
accumulation unit(/1/) (1.71)% 8.52% (/6/) 16.89% 4.40%
Number of accumulation units
outstanding at end of period 23,139,604 11,368,365 11,508 22,898,099 17,078,985
ALGER AMERICAN SMALL
CAP PORTFOLIO
Value at beginning of period $9.959 $10.000(/7/)
Value at end of period $9.437 $ 9.959
Increase (decrease) in value of
accumulation unit(/1/) (5.24)% (0.41)%
Number of accumulation units
outstanding at end of period 6,339,407 781,836
CALVERT RESPONSIBLY
INVESTED BALANCED
PORTFOLIO*
Value at beginning of period $11.036 $10.278 $10.000(/8/)
Value at end of period $10.554 $11.036 $10.278
Increase (decrease) in value of
accumulation unit(/1/) (4.37)% 7.37% 2.78%
Number of accumulation units
outstanding at end of period 521,141 144,168 2,556
FRANKLIN GOVERNMENT
SECURITIES TRUST
Value at beginning of period $10.642 $10.008 $10.000(/8/)
Value at end of period $10.119 $10.642 $10.008
Increase (decrease) in value of
accumulation unit(/1/) (4.91)% 6.33% 0.08%
Number of accumulation units
outstanding at end of period 325,365 167,137 5,559
</TABLE>
<TABLE>
<CAPTION>
1989 1988 1987 1986 1985
---------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $59.871 $52.885 $50.760 $43.205 $33.323
Value at end of period $76.311 $59.871 $52.885 $50.760 $43.205
Increase (decrease) in value of
accumulation unit(/1/) 27.46% 13.21% 4.19% 17.49% 29.66%
Number of accumulation units
outstanding at end of period 17,142,820 16,455,396 16,497,406 16,578,251 14,186,456
AETNA INCOME SHARES
Value at beginning of period $25.574 $24.061 $23.308 $20.703 $17.145
Value at end of period $28.943 $25.574 $24.061 $23.308 $20.703
Increase (decrease) in value of
accumulation unit(/1/) 13.17% 6.29% 3.23% 12.58% 20.75%
Number of accumulation units
outstanding at end of period 6,202,834 5,955,293 5,372,271 6,188,470 4,673,837
AETNA VARIABLE ENCORE FUND
Value at beginning of period $27.783 $26.171 $24.812 $23.504 $21.942
Value at end of period $30.012 $27.783 $26.171 $24.812 $23.504
Increase (decrease) in value of
accumulation unit(/1/) 8.02% 6.16% 5.48% 5.57% 7.12%
Number of accumulation units
outstanding at end of period 8,286,033 8,154,644 7,326,151 6,692,947 7,220,756
AETNA INVESTMENT
ADVISERS FUND, INC.
Value at beginning of period $10.000(/5/)
Value at end of period $10.437
Increase (decrease) in value of
accumulation unit(/1/) 4.37%
Number of accumulation units
outstanding at end of period 9,535,986
ALGER AMERICAN SMALL
CAP PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(/1/)
Number of accumulation units
outstanding at end of period
CALVERT RESPONSIBLY
INVESTED BALANCED
PORTFOLIO*
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(/1/)
Number of accumulation units
outstanding at end of period
FRANKLIN GOVERNMENT
SECURITIES TRUST
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(/1/)
Number of accumulation units
outstanding at end of period
</TABLE>
9
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
(SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
1994 1993 1992
---------- --------- -------
<S> <C> <C> <C>
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.000(/9/)
Value at end of period $10.581
Increase (decrease) in value of
accumulation unit(/2/) 5.81%
Number of accumulation units
outstanding at end of period 753,862
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $10.000(/9/)
Value at end of period $ 9.873
Increase (decrease) in value of
accumulation unit(/2/) (1.27)%
Number of accumulation units
outstanding at end of period 28,543
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.877 $ 9.832 $10.000(/8/)
Value at end of period $10.154 $10.877 $ 9.832
Increase (decrease) in value of
accumulation unit(/2/) (6.65)% 10.63% (1.68)%
Number of accumulation units
outstanding at end of period 703,676 135,614 561
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $11.747 $10.864 $10.000(/8/)
Value at end of period $11.026 $11.747 $10.864
Increase (decrease) in value of
accumulation unit(/2/) (6.14)% 8.13% 8.64%
Number of accumulation units
outstanding at end of period 1,865,104 546,559 10,645
SCUDDER INTERNATIONAL PORTFOLIO
Value at beginning of period $12.957 $ 9.578 $10.000(/8/)
Value at end of period $12.687 $12.957 $ 9.578
Increase (decrease) in value of
accumulation unit(/2/) (2.08)% 35.28% (4.22)%
Number of accumulation units
outstanding at end of period 6,558,946 1,020,233 5,232
TCI GROWTH
Value at beginning of period $12.069 $10.692 $10.000(/8/)
Value at end of period $11.781 $12.069 $10.692
Increase (decrease) in value of
accumulation unit(/2/) (2.39)% 12.88% 6.92%
Number of accumulation units
outstanding at end of period 12,853,828 3,667,821 2,254
</TABLE>
(/1/) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charges or the fixed dollar
annual maintenance fee, if any. Inclusion of those charges would reduce
the investment results shown.
(/2/) The Accumulation Unit value was converted to $10.000 on August 21, 1992,
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $97.817. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 0.67%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 4.54%.
(/3/) The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $38.521. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 4.70%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.68%.
(/4/) The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $34.397. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 1.73%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.48%.
(/5/) The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.
(/6/) The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $13.118. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 2.99%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 1.89%.
(/7/) The initial Accumulation Unit value was established at $10.000 on
September 17, 1993, the date on which the Portfolio became available under
the Contract.
(/8/) The initial Accumulation Unit value was established at $10.000 on August
21, 1992, the date on which the Fund/Portfolio became available under the
Contract.
(/9/) The initial Accumulation Unit value was established at $10.000 during
October 1994, when funds were first received in this option.
* Formerly Calvert Socially Responsible Series.
10
<PAGE>
PERFORMANCE DATA
From time to time, the Company may advertise different types of historical
performance for the variable funding options of the Separate Account available
under the Contracts described in this Prospectus. The Company may advertise the
"standardized average annual total returns" of the variable funding options,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
return." Both methods are described below. Further information is contained in
the SAI.
"Standardized average annual total returns" are computed according to a formula
in which a hypothetical investment of $1,000 is applied to the variable funding
options under the Contract and then related to the ending redeemable values
over the most recent one, five and ten-year periods (or since inception if less
than ten years). Standardized returns will reflect the deduction of all
recurring charges during each period (e.g., mortality and expense risk charges,
the annual maintenance fee, the administrative expense charge and any
applicable deferred sales charge).
"Non-standardized return" will be calculated in a similar manner, except that
non-standardized figures will not reflect the deduction of any applicable
deferred sales charge (which would decrease the level of performance shown if
reflected in these calculations). The non-standardized figures may also include
a three-year period.
For Funds that were in existence prior to the date that the Fund became
available under the Contract, the performance data will show the investment
performance that such Fund would have achieved (reduced by the applicable
charges) had it been available under the Contract for the period quoted.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Funds to established market indexes
such as the Standard & Poor's 500 Stock Index and the Dow Jones Industrial
Average or to the percentage change in value of other management investment
companies that have investment objectives similar to the Fund being compared.
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. may be published by us
in advertisements and reports to you and to Contract Holders. The purpose of
the ratings is to reflect our financial strength and/or claims-paying ability.
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 may be quoted by us. From time to time,
articles from newspapers and magazines or other publications or reports,
including, but not limited to The Wall Street Journal, Money magazine, USA
Today and The VARDS Report may also be quoted by us.
11
<PAGE>
THE COMPANY
Aetna Life Insurance and Annuity Company, the depositor for Variable Annuity
Account C, is a stock life insurance company organized in 1976 under the
insurance laws of the State of Connecticut. As of December 31, 1994, the
Company managed over $20.4 billion of assets. As of December 31, 1993, the
Company ranked among the top 2% of all U.S. life insurance companies by size.
It is a wholly owned subsidiary of Aetna Life and Casualty Company which, with
its subsidiaries, constitutes one of the nation's largest diversified financial
services organizations. The Company's Home Office is located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C is a separate account established by us in 1976
pursuant to the insurance laws of the State of Connecticut. The Separate
Account was formed for the purpose of segregating assets attributable to the
variable portions of Contracts from the Company's other assets. The Separate
Account is registered as a unit investment trust under the Investment Company
Act of 1940, and meets the definition of "separate account" under the Federal
Securities Laws.
Although the Company holds title to the assets of the Separate Account, such
assets of the Separate Account are not chargeable with liabilities arising out
of any other business we may conduct. Income, gains or losses of the Separate
Account are credited to or charged against the assets of the Separate Account
without regard to our other income, gains or losses. All obligations arising
under the Contracts are our general corporate obligations.
THE FUNDS
The Contract Holder will designate some or all of the mutual funds described
below as variable funding options under the Contract. You may select one or
more of the Funds for investment of the Purchase Payments made on your behalf.
Except where noted, all of the Funds are diversified as defined in the
Investment Company Act of 1940. The availability of the Funds is subject to
applicable regulatory authorization. Not all Funds are available in all
jurisdictions or under all Contracts.
. AETNA VARIABLE FUND (sometimes called the "Growth and Income Fund") seeks
to maximize total return through investments in a diversified portfolio
of common stocks and securities convertible into common stock.
. AETNA INCOME SHARES (sometimes called the "Bond Fund") seeks to maximize
total return, consistent with reasonable risk, through investments in a
diversified portfolio consisting primarily of debt securities.
. AETNA VARIABLE ENCORE FUND (sometimes called the "Money Market Fund")
seeks to provide high current return, consistent with preservation of
capital and liquidity, through investment in high-quality money market
instruments. An investment in the Fund is neither insured nor guaranteed
by the U.S. Government.
. AETNA INVESTMENT ADVISERS FUND, INC. (sometimes called the "Managed
Fund") is a managed mutual fund which seeks to maximize investment return
consistent with reasonable safety of principal by investing in one or
more of the following asset classes: stocks, bonds and cash equivalents
based on the Company's judgment of which of those sectors or mix thereof
offers the best investment prospects.
. AETNA GENERATION PORTFOLIOS, INC.--AETNA ASCENT VARIABLE PORTFOLIO seeks
to provide capital appreciation by allocating its investments among
equities and fixed income securities. Aetna Ascent Variable Portfolio is
managed for investors who generally have an investment horizon exceeding
15 years, and who have a high level of risk tolerance. See the Fund's
prospectus for a discussion of the risks involved.
. AETNA GENERATION PORTFOLIOS, INC.--AETNA CROSSROADS VARIABLE PORTFOLIO
seeks to provide total return (i.e., income and capital appreciation,
both realized and unrealized) by allocating its investments among
equities and fixed income securities. Aetna Crossroads Variable Portfolio
is managed for investors who generally have an investment horizon
exceeding 10 years and who have a moderate level of risk tolerance.
12
<PAGE>
. AETNA GENERATION PORTFOLIOS, INC.--AETNA LEGACY VARIABLE PORTFOLIO seeks
to provide total return consistent with preservation of capital by
allocating its investments among equities and fixed income securities.
Aetna Legacy Variable Portfolio is managed for investors who generally
have an investment horizon exceeding five years and who have a low level
of risk tolerance.
. ALGER AMERICAN FUND--ALGER AMERICAN GROWTH PORTFOLIO seeks long-term
capital appreciation by investing in a diversified, actively managed
portfolio of equity securities, primarily of companies with total market
capitalization -- present market value per share multiplied by the total
number of shares outstanding -- of $1 billion or greater. Income is a
consideration in the selection of investments but is not an investment
objective.
. ALGER AMERICAN FUND--ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
("Alger American Small Cap Portfolio") seeks capital return through
investment in the common stock of smaller companies offering the
potential for significant price gain. It invests at least 85% of its net
assets in equity securities and at least 65% of its net assets in equity
securities of companies that, at the time of purchase, have "total market
capitalization" -- present market value per share multiplied by the total
number of shares outstanding -- of less than $1 billion. Investing in
smaller companies may present risks not present in investments in larger
companies. See the Fund's prospectus for a discussion of these risks.
. CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO is a nondiversified
portfolio that seeks growth of capital through investment in enterprises
that make a significant contribution to society through their products
and services and through the way they do business. Prior to May 1, 1995,
the Fund was known as the Calvert Socially Responsible Series.
. FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II--CONTRAFUND
PORTFOLIO ("Fidelity Contrafund Portfolio") seeks maximum total return
over the long term by investing its assets mainly in equity securities of
companies that are undervalued or out-of-favor.
. FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--EQUITY-INCOME
PORTFOLIO ("Fidelity Equity-Income Portfolio") seeks reasonable income by
investing primarily in income-producing equity securities. In choosing
these securities, the Fund will also consider the potential for capital
appreciation.
. FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--GROWTH PORTFOLIO
("Fidelity Growth Portfolio") seeks to achieve capital appreciation by
investing primarily in common stock, although the Fund is not limited to
any one type of security.
. FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--OVERSEAS
PORTFOLIO ("Fidelity Overseas Portfolio") seeks long-term growth of
capital primarily through investments in foreign securities (at least 65%
from at least three countries outside of North America). International
investments such as these involve greater risks than U.S. investments.
. FRANKLIN GOVERNMENT SECURITIES TRUST seeks income through investments in
obligations of the U.S. Government or its agencies or instrumentalities,
primarily GNMA obligations.
. JANUS ASPEN SERIES--AGGRESSIVE GROWTH PORTFOLIO ("Janus Aspen Aggressive
Growth Portfolio") is a nondiversified portfolio that seeks long-term
growth of capital by emphasizing investments in common stocks of
companies with market capitalizations between $1 billion and $5 billion.
. JANUS ASPEN SERIES--BALANCED PORTFOLIO ("Janus Aspen Balanced Portfolio")
seeks both long-term growth of capital and current income. The Portfolio
is designed for investors who want to participate in the equity markets
through a more moderate investment than a pure growth fund. Investments
in income-producing securities are intended to result in a portfolio that
provides a more consistent total return than may be attainable through
investing solely in growth stocks. The Portfolio is not designed for
investors who desire a consistent level of income.
. JANUS ASPEN SERIES--FLEXIBLE INCOME PORTFOLIO ("Janus Aspen Flexible
Income Portfolio") seeks to obtain maximum total return, consistent with
preservation of capital from a combination of current income and capital
appreciation. Janus Aspen Flexible Income Portfolio invests in all
13
<PAGE>
types of income-producing securities and may have substantial holdings of
debt securities rated below investment grade ("high yield, high risk
securities") also commonly known as "junk bonds." High yield, high risk
securities involve certain risks. See the Fund's prospectus for a
discussion of these risks.
. JANUS ASPEN SERIES--GROWTH PORTFOLIO ("Janus Aspen Growth Portfolio")
seeks long-term growth of capital by investing primarily in a
diversified portfolio of common stocks of a large number of issuers of
any size. The Portfolio generally emphasizes issuers with large market
capitalizations.
. JANUS ASPEN SERIES--SHORT-TERM BOND PORTFOLIO ("Janus Aspen Short-Term
Bond Portfolio") seeks as high a level of current income as is consistent
with preservation of capital by investing primarily in short- and
intermediate-term fixed income securities. The Portfolio will normally
maintain a dollar-weighted average portfolio maturity of less than three
years, but not to exceed five years depending upon its portfolio
manager's opinion of prevailing market, financial and economic
conditions.
. JANUS ASPEN SERIES--WORLDWIDE GROWTH PORTFOLIO ("Janus Aspen Worldwide
Growth Portfolio") seeks long-term growth of capital by investing
primarily in common stocks of companies of foreign and domestic issuers
of any size. The Portfolio normally invests in issuers from at least five
different countries including the United States. International
investments involve risks not present in U.S. Securities.
. LEXINGTON NATURAL RESOURCES TRUST is an nondiversified portfolio that
seeks long-term growth of capital through investment primarily in common
stocks of companies which own or develop natural resources and other
basic commodities or supply goods and services to such companies. Current
income will not be a factor. The Fund may invest up to 25% of its total
assets in foreign securities. Foreign investing involves risks that
differ from those involved in domestic investing. See the Fund's
prospectus for a discussion of these risks.
. NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST--GROWTH PORTFOLIO
("Neuberger & Berman Growth Portfolio") seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above-average potential for capital appreciation.
. SCUDDER VARIABLE LIFE INVESTMENT FUND--INTERNATIONAL PORTFOLIO ("Scudder
International Portfolio") seeks long-term growth of capital primarily
through diversified holdings of marketable foreign equity investments.
Investing in foreign securities may involve a greater degree of risk than
investing in domestic securities. See the Fund's prospectus for a
discussion of the risks involved.
. TCI PORTFOLIOS, INC.--TCI GROWTH (a Twentieth Century Fund) seeks capital
growth by investing in common stocks (including securities convertible
into common stocks) and other securities that meet certain fundamental
and technical standards of selection and, in the opinion of TCI Growth's
management, have better than average potential for appreciation. TCI
Growth tries to stay fully invested in such securities, regardless of the
movement of prices generally. The Fund may invest in foreign securities.
Foreign investing involves risks that differ from those involved in
domestic investing. See the Fund's prospectus for a discussion of these
risks.
There is no assurance that the Funds will achieve their investment objectives.
Participants bear the full investment risk of investments in the Funds
selected.
Some of the Funds may use instruments known as derivatives as part of their
investment strategies as described in their respective prospectuses. The use of
certain derivatives such as inverse floaters and principal only debt
instruments may involve higher risk of volatility to a Fund. The use of
leverage in connection with derivatives can also increase risk of losses. See
the prospectus for the Funds for a discussion of the risks associated with an
investment in those funds.
14
<PAGE>
More comprehensive information, including a discussion of potential risks, is
found in the current prospectus for each Fund which is distributed with and
must accompany this Prospectus. Contract Holders and Participants should read
the accompanying prospectuses carefully before investing. Additional
prospectuses and the Statements of Additional Information for this Prospectus
and each of the Funds can be obtained from the Company's Home Office at the
address and telephone number listed on the cover of this Prospectus.
FUND INVESTMENT ADVISERS
The following identifies the investment adviser and the subadviser, if any, for
each Fund.
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISER SUBADVISER
---- ------------------ ----------
<S> <C> <C>
Aetna Variable Fund Aetna Life Insurance --
and Annuity Company (ALIAC)
Aetna Income Shares ALIAC
Aetna Variable Encore ALIAC --
Fund
Aetna Investment ALIAC --
Advisers Fund, Inc.
Aetna Ascent Variable ALIAC --
Portfolio
Aetna Crossroads ALIAC --
Variable Portfolio
Aetna Legacy Variable ALIAC --
Portfolio
Alger American Growth Fred Alger Management, Inc. --
Portfolio
Alger American Small Cap Fred Alger Management, Inc. --
Portfolio
Calvert Responsibly Calvert Asset Management NCM Capital
Invested Balanced Company, Inc. Management Group, Inc.
Portfolio
Fidelity Contrafund Fidelity Management --
Portfolio & Research Company
Fidelity Equity-Income Fidelity Management --
Portfolio & Research Company
Fidelity Growth Fidelity Management --
Portfolio & Research Company
Fidelity Overseas Fidelity Management --
Portfolio & Research Company
Franklin Government Franklin Advisers, Inc. --
Securities Trust
Janus Aspen Aggressive Janus Capital Corporation --
Growth Portfolio
Janus Aspen Balanced Janus Capital Corporation --
Portfolio
Janus Aspen Flexible Janus Capital Corporation --
Income Portfolio
Janus Aspen Growth Janus Capital Corporation --
Portfolio
Janus Aspen Short-Term Janus Capital Corporation --
Bond Portfolio
Janus Aspen Worldwide Janus Capital Corporation --
Growth Portfolio
Lexington Natural Lexington Management Market Systems
Resources Trust Corporation Research Advisors, Inc.
Neuberger & Berman Neuberger & Berman Neuberger & Berman
Growth Portfolio Management Incorporated
Scudder International Portfolio Scudder, Stevens & Clark, Inc. --
TCI Growth Investors Research Corporation --
</TABLE>
15
<PAGE>
MIXED AND SHARED FUNDING
Shares of the Funds are sold to us for funding variable annuities. The Funds
may be sold to other companies for the same purpose. This is referred to as
"shared funding." Shares of the Funds may also be used for funding variable
life insurance policies through variable life separate accounts sponsored by us
or by third parties. This is referred to as "mixed funding."
It is conceivable that, in the future, it may be disadvantageous for variable
annuity separate accounts and variable life separate accounts of the same or of
an unaffiliated insurance company to invest in these Funds simultaneously,
since the interests of the contract holders or policy owners or insurance
companies may differ. Each Fund's Board of Trustees or Directors has agreed to
monitor events in order to identify any material irreconcilable conflicts which
may possibly arise and to determine what action, if any, should be taken in
response thereto. If such a conflict were to occur, one of the separate
accounts might withdraw its investment in a Fund. This might force that Fund to
sell portfolio securities at disadvantageous prices.
FUND ADDITIONS, LIMITATIONS AND SUBSTITUTIONS
We may, from time to time, add additional mutual funds as eligible variable
funding options under the Contracts. In such event, the Contract Holder or you,
if permitted by the Contract Holder, may be permitted to select from these
other funds, subject to any conditions that may be imposed in connection with
those options. No more than 18 different choices of investment options may be
made over the life of the Account. See "Transfers and Allocation Changes."
The Company's current policy is to allow only Aetna Income Shares, Aetna
Variable Fund and Aetna Investment Advisers Fund, Inc. to be used as variable
investment options during the Annuity Period. See "Annuity Period Elections."
The Contract Holder may decide to offer only a select number of Funds as
funding options under its Plan, or may decide to substitute shares of one Fund
for shares of another Fund currently held by the Separate Account.
PURCHASE
CONTRACT PURCHASE
An organization eligible to establish tax-deferred annuity plans under Section
403(b) of the Code may acquire one or both group Contracts for its Plan by
filling out the appropriate master application forms and returning them to the
Company or to a Distributor for delivery to the Company. Once we approve the
application, a group Contract (or Contracts) is issued to the organization as
Contract Holder. The Participant may make any choices allowed by the Contract
for his or her Account. See "Contract Rights." A Single Purchase Payment
Contract will be issued for lump-sum transfers of amounts accumulated under a
preexisting Plan. An installment Purchase Payment Contract will be issued for
continuing, periodic payments.
Employees of the Contract Holder may fill out an enrollment form or forms and
return them to the Company or to a Distributor for delivery to the Company for
review, acceptance or rejection. The Company must accept or reject an
application or enrollment form within two business days of its receipt. If the
application or enrollment form is incomplete, the Company may hold it and any
accompanying Purchase Payment for five days. Purchase Payments may be held for
longer periods only with the consent of the Contract Holder or Participant,
pending acceptance of the application or enrollment form. If the application or
enrollment form is accepted, a Contract will be issued to the Contract Holder
or the Purchase Payment will be accepted. Any Purchase Payment accompanying the
application or
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enrollment form or received prior to acceptance of the application or
enrollment form, will be invested as of the date of acceptance. If the
application or enrollment form is rejected, the application or enrollment form
and any Purchase Payments will be returned to the Contract Holder. Initial
payments held for longer than the five business days will be deposited in the
Aetna Variable Encore Fund until the forms are completed.
Two group Contracts are issued to each Contract Holder to cover all present and
future Participants. Contracts are issued in allocated form which provides for
the establishment of an Account for each Participant.
You may cancel your participation under the Contract within 10 days after
receiving your Certificate. See "Right to Cancel" for more information.
There is currently no minimum amount for lump-sum payments; however, we reserve
the right to set such a minimum in the future. Lump-sum transfers below this
minimum will be applied to an installment Purchase Payment Contract.
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from your gross income. Such limit must be calculated in accordance
with Sections 403(b), 415 and 402(g) of the Code. In addition, Purchase
Payments will be excluded from your gross income only if the 403(b) Plan meets
certain Code non-discrimination requirements. For 401(a) Plans, see Appendix
IV.
NET PURCHASE PAYMENTS
Each Purchase Payment is forwarded to us through a Distributor. Each Net
Purchase Payment, to the extent it is to be accumulated on a variable basis, is
placed in the Separate Account and credited to the Contract.
You may elect to have the Net Purchase Payment(s) accumulate (a) on a variable
basis under one or more of the available Funds; (b) on a fixed basis under one
or more of the available credited interest options; or (c) in a combination of
any of the available investment options. The Net Purchase Payment(s) must be
allocated to the respective options in increments of whole percentage amounts.
Under an installment Purchase Payment Contract, you may elect to change the
allocation of future Net Purchase Payments to any accumulation option described
above.
DISTRIBUTION
The Company will serve as Underwriter for the securities sold by this
Prospectus. The Company is registered as a broker-dealer with the Securities
and Exchange Commission and is a member of the National Association of
Securities Dealers, Inc. (NASD). As Underwriter, the Company will contract with
one or more registered broker-dealers ("Distributors"), including at least one
affiliate of the Company, to offer and sell the Contracts. All persons offering
and selling the Contracts must be registered representatives of the
Distributors and must also be licensed as insurance agents to sell Variable
Annuity Contracts. These registered representatives may also provide services
to Participants in connection with establishing their Accounts under the
Contract.
Persons offering and selling the Contracts may receive commissions in
connection with the sale of the Contracts. The maximum percentage amount that
the Company will ever pay as commission with respect to any given Purchase
Payment is with respect to those made during the first year of Purchase
Payments under a Certificate. The percentage amount will range from 1% to 7% of
those Purchase Payments. The Company may also pay renewal commissions on
Purchase Payments made after the first year and asset-based service fees. The
average of all payments made by the Company is estimated to equal approximately
3% of the total Purchase Payments made over the life of an average Contract.
The Company may also reimburse the Distributor for certain expenses. The name
of the Distributor and the registered representative responsible for your
Account are set forth on your enrollment form. Commissions and sales related
expenses are paid by the Company and are not deducted from Purchase Payments.
See "Charges and Deductions--Deferred Sales Charge."
Occasionally, we may pay commissions and fees to Distributors which are
affiliated or associated with the Contract Holder or the Participants. We may
also enter into agreements with some entities associated with the Contract
Holder or Participants in which we would agree to pay the association for
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certain services in connection with administering the Contracts. In both these
circumstances there may be an understanding that the Distributor or association
would endorse the Company as a provider of the Contract. You will be notified
if you are purchasing a Contract that is subject to these arrangements.
Participants acquiring interests in Contracts issued under the American
Hospital Association (AHA) endorsement should be aware that AHA Insurance
Resource Inc., an affiliate of AHA, is a registered broker-dealer and
participates as a Distributor in connection with the contract. As a
Distributor, it receives commissions based on Purchase Payments and service
fees, as described above. In addition, the Company may make loans to AHA
Insurance Resource Inc. or its agents payable out of, or collateralized by,
their commissions.
Participants acquiring interests in Contracts issued under the Florida Teachers
Union (FTU) endorsement should be aware that PEESCO, a wholly-owned subsidiary
of FTU is a registered broker-dealer and participates as a Distributor in
connection with the Contract. As a Distributor, it receives commissions and
fees which are based on Purchase Payments and service fees, as described above.
In addition, the Company may make loans to PEESCO, or its agents payable out
of, or collateralized by, their commissions.
DETERMINING CONTRACT VALUE
ACCUMULATION UNITS
A Purchase Payment that is directed to one or more of the Funds is deposited in
the Separate Account and credited to the Account in the form of Accumulation
Units for each Fund selected. The number of Accumulation Units credited is
determined by dividing the applicable portion of the Purchase Payment by that
Contract's Accumulation Unit value of the appropriate Fund. The Accumulation
Unit value used is that next-computed following the date on which a Purchase
Payment is received, unless the application has not been accepted. In that
event, Purchase Payments will be credited at the Accumulation Unit Value next
determined after acceptance of the application. Shares of the Funds are
purchased by the Separate Account at the net asset value next determined by the
Fund following receipt of Purchase Payments by the Separate Account. The value
of Accumulation Units attributable to the Funds will be affected by the
investment performance, expenses and charges of those Funds. Generally, if the
net asset value of the Fund increases, so does the Accumulation Unit value;
however, performance of the Separate Account is reduced by charges and
deductions under the Contract.
Accumulation Units are valued separately for each Fund. Therefore, if you elect
to have a Purchase Payment invested in a combination of Funds, you will have
Accumulation Units credited from more than one source. The value of your
Account as of the most recent Valuation Period, is determined by adding the
value of any Accumulation Units attributed to the Fund(s) you have selected to
the value of any amounts invested in the Fixed Account, the Fixed Plus Account
and in GAA.
NET INVESTMENT FACTOR
The value of an Accumulation Unit for any Valuation Period is calculated by
multiplying the Accumulation Unit value for the immediately preceding Valuation
Period by the net investment factor of the appropriate investment option for
the current period.
The net investment factor is calculated separately for each Fund in which
assets of the Separate Account are invested. It is determined by adding
1.0000000 to the net investment rate.
The net investment rate equals (a) the net assets of the Fund held by the
Separate Account at the end of a Valuation Period, minus (b) the net assets of
the Fund held by the Separate Account at the beginning of a Valuation Period,
plus or minus (c) taxes or provision for taxes, if any, attributable to the
operation of the Separate Account, divided by (d) the value of the Fund's
Accumulation and Annuity Units held by the Separate Account at the beginning of
the Valuation Period, minus (e) a daily charge at an annual rate of 1.25% for
the Annuity mortality and expense risks; and a daily administrative expense
charge which will not exceed 0.25% on an annual basis. The net investment rate
may be more or less than zero.
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TRANSFER CREDITS
The Company provides a transfer credit on transferred assets, subject to
certain conditions (and state approval). Transferred assets are the value of
contributions made on your behalf to this Plan or to a similar Plan, before the
amounts were applied to this Contract. This benefit is provided on a
nondiscriminatory basis if your Contract is eligible.
The transfer credit will equal a percentage of the transferred assets applied
to the Contract that remain in the Contract after a specified period of time.
Once transfer credit amounts are applied to the Accounts, all provisions of the
Contract apply. If a transfer credit is due under the Contract, you will be
provided with additional information specific to the Contract.
CONTRACT RIGHTS
RIGHT TO CANCEL
You or the Contract Holder may cancel participation under the Contract no later
than ten days (or as otherwise allowed by state law) after receiving the
certificate or Contract by returning it to us, along with a written notice of
cancellation. We will produce a refund not later than seven days after we
receive the certificate or Contract and the written notice at our Home Office.
Unless the applicable state law requires a refund of Purchase Payment(s) only,
we will refund the Purchase Payment(s) plus any increase or minus any decrease
in the value attributable to any Purchase Payment(s) allocated to the variable
option(s).
RIGHTS UNDER THE CONTRACT
The Contract Holder has no right, title, or interest in the amounts held under
the Contracts or Accounts. The Contracts and Accounts are not subject to the
claims of any creditors of the Contract Holder. You make all elections under
the Contracts.
TRANSFERS AND ALLOCATION CHANGES
During each calendar year, you may change the allocation of future Net Purchase
Payments among the allowable investment options. There is no limit to the
number of changes you may make to your allocations. You may also make any
number of transfers of not less than $500 among funding options during the
calendar year, without charge. You may not make allocations or transfers,
however, to new funding options if the total number of funding options you have
selected would exceed 18, since the time you acquired an interest in the
Contract. Each variable funding option selected, the Fixed Account, Fixed Plus
Account and each guaranteed term of GAA, counts as one option, even if you no
longer have funds allocated to that option.
Any transfer will be based on the Accumulation Unit value next determined after
we receive a valid request at our Home Office. See Appendix I, II and III for
information on transfers from GAA, the Fixed Account and the Fixed Plus
Account.
During the Annuity Period, transfers of accumulated value are not available.
WITHDRAWALS
Subject to restrictions on withdrawals from 403(b) accounts under "Withdrawal
Restrictions," you may withdraw all or a portion of the Account value during
the Accumulation Period. For 401(a) Plans see Appendix IV. To do so, you must
properly complete a disbursement form and send it to our Home Office.
Disbursement forms are available from us and our representatives. Withdrawals
may be requested in one of the following ways:
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. Full Withdrawal of an Account: The amount paid will be the full value of
the Funds, GAA, (plus or minus the Market Value Adjustment), and the
Fixed Account held in the Account minus any applicable deferred sales
charge and maintenance fee due plus one fifth of the amount held in the
Fixed Plus Account*, minus any Fixed Plus Account withdrawals, transfers
or annuitizations made in the prior 12 months.**
. Partial Withdrawal (Percentage): The amount paid will be the percentage
of the Account value requested minus any applicable deferred sales
charge.** However, amounts withdrawn from the Fixed Plus Account may not
exceed 20% minus any Fixed Plus Account*** withdrawals, transfers or
annuitizations in the prior 12 months.
. Partial Withdrawal (Specific Dollar Amount): The amount paid will be the
dollar amount requested. However, the amount withdrawn from the Account
will equal the dollar amount requested plus any applicable deferred sales
charge.** The amount withdrawn from the Fixed Plus Account may not exceed
20% minus any Fixed Plus Account*** withdrawals, transfers or
annuitizations in the prior 12 months.
* The balance of the amount held in the Fixed Plus Account will be paid in
four annual installments. If the withdrawal is due to death, annuitization,
or meets other qualifications, the entire amount held in the Fixed Plus
Account will be paid in one lump sum (or used to provide Annuity payments)
rather than in annual installments. See Appendix III for more information.
** A 20% income tax may be withheld from amounts paid directly to you. See "Tax
Status--Contracts Used with Certain Retirement Plans."
*** The 20% limit is waived if the partial withdrawal is due to annuitization
or death. See Appendix III for more information.
All amounts paid will be based on account values as of the end of the Valuation
Period in which the request is received in our Home Office or such later date
as the disbursement form may specify. For any partial withdrawal, unless you
request otherwise, the value of the Accumulation Units cancelled will be
withdrawn proportionately from each investment option used under the Account.
Payments for withdrawal requests (subject to the above limitations on
withdrawals from the Fixed Plus Account) will be made in accordance with SEC
requirements, but normally not later than seven calendar days after a properly
completed disbursement form is received at our Home Office or within seven
calendar days of the date the disbursement form may specify. Payments may be
delayed for: (a) any period in which the New York Stock Exchange ("Exchange")
is closed (other than customary weekend and holiday closings) or in which
trading on the Exchange is restricted; (b) any period in which an emergency
exists where disposal of securities held by the funds is not reasonably
practicable or is not reasonably practicable for the value of the assets of the
Funds to be fairly determined; or (c) such other periods as the SEC may by
order permit for the protection of you and the Contract Holder. The conditions
under which restricted trading or an emergency exists shall be determined by
the rules and regulations of the SEC.
WITHDRAWAL RESTRICTIONS
The Code imposes restrictions on full or partial withdrawals from Accounts
attributable to Purchase Payments made on or after January 1, 1989, under a
salary reduction agreement, and to any earnings on the entire 403(b) Account
credited on and after January 1, 1989 (for 401(a) Contracts, see Appendix IV).
Withdrawals of these amounts are allowed only if you (a) have died, (b) have
become disabled, as defined in the Code, (c) have attained age 59 1/2, or (d)
have separated from service. Withdrawals are also allowed if you can show an
emergency provision, as defined by the IRS, but the withdrawal is limited to
the lesser of Purchase Payments attributable to your salary reduction
contributions made on or after January 1, 1989, or the amount necessary to
relieve the hardship. Even if a withdrawal is permitted under these provisions,
a 10% federal penalty tax may be assessed on the amount paid to
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you if it does not otherwise meet the exceptions to the penalty tax
provisions. See "Tax Status--Contracts Used with Certain Retirement Plans."
You must certify in writing that one of these conditions has been met before a
payment will be made.
You may request a full or partial withdrawal of an amount equal to the Account
Value as of December 31, 1988 (the "grandfathered" amount). Although the Code
withdrawal restrictions do not apply to this amount, a 10% federal penalty tax
may be assessed on the amount paid to you if it does not otherwise meet the
exceptions to the penalty tax provisions. See "Tax Status--Contracts Used with
Certain Retirement Plans."
We believe that the Code withdrawal restrictions do not apply to tax-free
transfers pursuant to Revenue Ruling 90-24. We further believe that the
withdrawal restrictions will not apply to any "grandfathered" amount which is
transferred pursuant to Revenue Ruling 90-24 into another 403(b) Contract.
Revenue Ruling 90-24 provides that a direct transfer from one 403(b)
investment to another 403(b) investment is not a distribution and is not
taxable if, after the transfer, the transferred funds continue to be subject
to the same or more stringent distribution requirements.
REINVESTMENT PRIVILEGE
You may elect to reinvest all or a portion of the proceeds received from the
full withdrawal of an Account within 30 days after such withdrawal.
Accumulation Units will be credited to the Account for the amount reinvested,
as well as any applicable maintenance fee and any appropriate portion of any
deferred sales charge imposed at the time of withdrawal. Any maintenance fee
which falls due after the withdrawal and before the reinvestment will be
deducted from the amount reinvested. Reinvested amounts will be reallocated to
the applicable investment options in the same proportion as they were
allocated at the time of withdrawal.
The number of Accumulation Units credited will be based upon the Accumulation
Unit value(s) next computed following receipt at our Home Office of the
reinvestment request along with the amount to be reinvested. The reinvestment
privilege may be used only once. If you are contemplating reinvestment, you
should seek competent advice regarding the tax consequences associated with
such a transaction.
CONTRACT LOANS
During the Accumulation Period, you may request a loan from the Account value
in lieu of a partial withdrawal, by properly completing and submitting to our
Home Office a loan request form provided by us (loans are not available under
401(a) Contracts). A loan may not be requested within 12 months from the date
of any prior loan request. The amount of the loan is limited by the provisions
of the Contract. If the loan meets the requirements described in the Contract
and in the loan agreement, it will not be reported to the Internal Revenue
Service ("IRS") by the Company as a taxable distribution.
Loans can only be made from those Account values held in the variable
investment options or in a credited interest option that allows loans (see
Appendix I, II and III). However, the entire Account value may be used to
determine the value against which a loan may be made. The employer may
authorize contract loans from the Employer Account Value (check with the
Contract Holder to see if this is available).
We do not permit Participants to receive Systematic Withdrawal Option ("SWO")
payments while they have outstanding loan balances; therefore, if you borrow
while receiving payments under SWO, we will automatically cancel future SWO
payments. See "Additional Withdrawal Options."
When a loan is made, the number of Accumulation Units equal to the loan amount
will be withdrawn from the Account. The amount will be withdrawn on a pro rata
basis from the allowable investment
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options under which values are accumulating. Accumulation Units taken from the
Account to provide a loan do not participate in the investment experience of
the investment options from which they were withdrawn. Loan interest rates are
determined in accordance with the terms of the Contract; they are determined
differently for ERISA and non-ERISA contracts .
Principal and interest on loans is amortized in quarterly installments over a
period of 1 to 5 years, as elected or, if the loan is taken for the purchase
of your primary residence, over a period of up to 20 years. Repayments
credited to the Account will be allocated to the same investment options in
the same proportion as amounts were withdrawn to make the loan.
A bill in the amount of the quarterly principal and interest repayments will
be mailed to you in advance of the repayment due date. The repayment will be
in default if it is not received by us at the Home Office when due.
If a quarterly repayment is in default, a 5% default charge, if applicable,
will be assessed on a portion of the defaulted payment as described in the
Contract. An automatic partial withdrawal of an amount equal to the payment in
default, plus the default charge, if applicable; plus any applicable
withdrawal charge will be made. Such withdrawals are reported to the Internal
Revenue Service as taxable distributions for that year and may be subject to
the 10% federal penalty tax. See "Tax Status."
If a repayment in excess of a billed amount is received, the excess will be
applied towards the principal portion of the outstanding loan. Payments
received which are less than the billed amount will be returned to you,
therefore, the repayment will be in default and the above will apply.
Prepayment of the entire loan is allowed. At the time of prepayment, we will
bill you for any accrued interest. We will consider the loan paid when this
accrued interest is paid.
If the Account is withdrawn with an outstanding loan balance, accrued interest
and any applicable deferred sales charge and any applicable default charge
will be deducted from the Account value. If there is an outstanding loan
balance, upon your death or the election of an annuity option, the loan is
cancelled. Interest due but not paid is deducted from the Account Value. The
amount of the cancelled loan(s) is a taxable distribution for that year and
may be subject to the federal 10% penalty tax.
As allowed by law, we may cancel any outstanding loan(s) if the Account Value
is less than 25% of the total of all outstanding loan(s). Any applicable
default charge and any applicable withdrawal charge is deducted. The amount of
the cancelled loan(s) is a taxable distribution for that year.
The Code requires the aggregation of all loans made to an individual employee
under a single employer-sponsored 403(b) Plan. However, since we have no
information concerning the outstanding loans that you may have with other
companies, we will only use the information available under Contracts issued
by us.
The Company has developed and plans to install a new loan provision before May
of 1996 subject to state insurance department approvals. If the loan provision
in your contract is changed, you will be notified. The difference between the
rate charged and the rate credited on the loaned amounts will not be more than
3%.
Default under the new loan provision will occur if two payments are missed.
Once a loan is in default the outstanding loan balance will be reported to the
IRS and due but unpaid interest will be reported to the IRS on an annual basis
until a distributable event occurs and we are able to close out the loan
record. Once the loan is in default but before a distributable event occurs,
there will be a $50 annual loan fee charged for ongoing recordkeeping.
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RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
A Participant in the Texas Optional Retirement Program may not elect to receive
any form of distribution from the Contract before retirement, except upon
becoming totally disabled or terminating employment with the Texas public
institutions of higher learning. These restrictions limit the conditions under
which a Participant may exercise the following contractual rights described in
this prospectus:
(a) The right to withdraw the Account in whole or in part, described under
"Withdrawals," and
(b) The right to advance the date on which Annuity payments are to begin,
described under "Annuity Period Elections."
The Company may require verification from the employer prior to any
distributions from the Contract.
These restrictions are imposed by reason of an opinion of the Texas Attorney
General interpreting applicable Texas law.
CHARGES AND DEDUCTIONS
This section describes the maximum Contract charges which we may deduct for
maintenance fees, administrative expenses and sales-related expenses. A
description of mortality and expense risk charges and Fund expenses is also
included.
Certain Contract Holders may qualify for a reduction of the charges described
in this section. We will not reduce or eliminate any charges that would be
unfairly discriminatory to any other Contract Holders.
MAINTENANCE FEE
An annual maintenance fee is deducted from each Account under an installment
Purchase Payment Contract during the Accumulation Period. This fee is to
reimburse us for some of our administrative expenses relating to the
establishment and maintenance of the Account(s). The maintenance fee is
deducted from each Account on its anniversary date (or, if not a Valuation
Date, on the next Valuation Date). We deduct this fee from each investment
option in the same proportion as the values held under each option have to the
total value of the Account or Plan Account.
The annual maintenance fee on each Account or Plan Account is $15 for those
Plans where annual Aggregate Purchase Payments are expected to be in excess of
$100,000 and the sponsoring employer has agreed to accommodate group meetings
on its premises for soliciting potential Participants. For Plans not meeting
these criteria, the annual maintenance fee is $20.
If a university establishes a Section 403(b) Plan and both employer and
voluntary employee contributions are made, two Accounts will be established for
each Participant. However, only one maintenance fee will be imposed providing
average annual Purchase Payments are $5,000 per Participant and annual Purchase
Payments for the Plan are $500,000 or more.
There is no maintenance fee deducted from a separate Account established under
an installment Purchase Payment Contract at the request of the Contract Holder
for a lump-sum payment of $10,000 or more made to the Contract on behalf of a
Participant.
No annual maintenance fee is deducted from a Plan Account established by a
Contract Holder under an unallocated Contract.
The annual maintenance fee may be reduced or eliminated under various
conditions as agreed to by us and by the Contract Holder in writing. In
determining a reduction in the annual maintenance fee, the following factors
will be considered:
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(a) The size, characteristics, and nature of the group to which a Contract
is issued, including: the annual Aggregate Purchase Payment(s), the
average annual Purchase Payments per Participant, the expected turnover
of employees, whether the Contract Holder will remit Purchase Payment
allocations electronically, the frequency of Purchase Payment
remittance, and any other factors pertaining to the characteristics of
the group or the Plan which may enable us to reduce the expense of
administration.
(b) Determination of our anticipated expenses in administering the
Contract, such as: billing for Purchase Payments, producing periodic
reports, providing for the direct payment of Contract charges rather
than having them deducted from Contract values, and any other factors
pertaining to the level and expense of administrative services which
will be provided under the Contract.
MORTALITY AND EXPENSE RISK CHARGES
The Company makes a daily deduction from the variable portion of Contract
values for mortality and expense risks. The deduction, made as part of the
calculation of Accumulation and Annuity Unit value(s), is equivalent to 1.25%
per year.
The mortality risk charge is to compensate us for the risk we assume when we
promise to continue making payments for the lives of individual Annuitants
according to Annuity rates specified in the Contract at issue. The expense risk
charge is to compensate us for the risk that actual expenses for costs incurred
under the Contract will exceed the maximum costs that can be charged under the
Contract. During 1994, the Company received $59,320,898 for mortality and
expense risks from Contracts under the Separate Account.
ADMINISTRATIVE EXPENSE CHARGE
The Company reserves the right to deduct a daily charge of not more than 0.25%
per year from the variable portion of Contract values to reimburse us for some
of the expenses we incur in administering the Contract. This charge will be
established by us on an annual basis effective each May 1 and continue until
April 30 of the following year. During the Accumulation Period, the charge may
fluctuate annually. Once an Annuity option is elected, the charge will be
established and will be effective during the entire Annuity Period.
Through April 30, 1996, we have established the charge to be zero. Since the
administrative expense charge is a percentage of the variable portion of
Contract values, there may be no relationship between the amount so deducted
and the amount of expenses attributable to the Contract.
FUND EXPENSES
Each Fund has an investment adviser. An investment advisory fee, based on the
Fund's average net assets, is deducted from the assets of each Fund and paid to
the investment adviser.
Most expenses incurred in the operations of the Funds are borne by that Fund.
Fund advisers may reimburse the Funds they advise for some or all of these
expenses. For further details on each Fund's expenses, you and the Contract
Holder should read the accompanying prospectus for each Fund and refer to the
Fee Table in this prospectus.
DEFERRED SALES CHARGE
There are no deductions from Purchase Payments for sales commissions or related
expenses. Sales commissions and expenses are advanced by the Company and
recovered out of any deferred sales charges or, if deferred sales charges are
insufficient, out of its profits from investment activities,
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including the mortality and expense risk charges under the Contract. For sales
commissions paid in connection with the sale of the Contracts see "Contract
Purchase - Distribution." Deferred sales charges may be deducted from amounts
withdrawn during the first 10 Purchase Payment Periods (for Installment
Purchase Payment Contracts) or 9 Account Years (for Single Purchase Payment
Contracts), as set forth in the table below. The deferred sales charge will
apply to withdrawals during the Accumulation Period. It will apply during the
Annuity Period if the nonlifetime Annuity Option is elected on a variable basis
and the remaining value is withdrawn before three years of Annuity payments
have been completed. See "Annuity Period - Annuity Options." There are
additional restrictions and deductions on withdrawals. See "Contract Rights -
Withdrawals."
The following tables reflect the deferred sales charge deduction as a
percentage of the amount withdrawn from the Funds, GAA, and the Fixed Account:
<TABLE>
<CAPTION>
INSTALLMENT PURCHASE PAYMENT CONTRACT:
PURCHASE PAYMENT DEFERRED SALES
PERIODS COMPLETED CHARGE DEDUCTION
<S> <C>
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or 10 2%
More than 10 0%
</TABLE>
<TABLE>
<CAPTION>
SINGLE PURCHASE PAYMENT CONTRACT:
ACCOUNT YEARS DEFERRED SALES
COMPLETED CHARGE DEDUCTION
<S> <C>
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
</TABLE>
The deduction for the deferred sales charge will not exceed 8.5% of the total
Purchase Payments actually made to the Account.
A deferred sales charge is not deducted from any portion of the Account value
which is:
(a) applied to provide Annuity benefits,
(b) withdrawn on or after the tenth anniversary of the effective date of
the Account,
(c) paid due to your death before Annuity payments begin,
(d) withdrawn due to the election of the Estate Conservation Option ("ECO")
or the Systematic Withdrawal Option ("SWO"),
(e) paid where the Account Value is $3,500 or less and no amount has been
withdrawn, taken as a loan, or used to purchase Annuity benefits during
the prior 12 months,
(f) withdrawn from an installment Purchase Payment Contract providing the
Participant is at least age 59 1/2 and nine Purchase Payment Periods
have been completed to the Account of the Participant, or
(g) paid in an amount of up to 10% of the current Account value. This
applies only to the first partial withdrawal in each calendar year. The
10% amount will be calculated using the Account value on the date the
request is received, in good order, at our Home Office. This provision
is available if you are between the ages of 59 1/2 and 70 1/2. Any
loans outstanding on an Account are excluded from the Account value
when calculating the 10% amount. This provision does not apply to a
full withdrawal of the Account, or to partial withdrawals due to loan
defaults (see "Contract Loans"). This provision may not be exercised if
SWO is elected. (See "Additional Withdrawal Options.")
In addition, for Participants in Texas Optional Retirement program and
Kansas Board of Regents only, no deferred sales charge will be deducted
from any Account value which is withdrawn due to the Participant's
separation from service. (The Contract Holder must submit documentation
satisfactory to the Company confirming the Participant is no longer
providing services to the employer.)
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In the instances cited above, no deferred sales charge is deducted. However,
the amount withdrawn may be subject to the 10% federal penalty tax. See "Tax
Status--Contracts Used with Certain Retirement Plans."
If you transfer the total account value from another tax-deferred annuity
Contract with the Company to an Account under this Contract, the effective date
of the new Account, for purposes of calculating the deferred sales charge, will
be the effective date of your original Account under a tax-deferred annuity
Contract with the Company. You will also receive credit for the number of
completed Purchase Payment Periods or Account Years from that Account plus the
number of completed Purchase Payment Periods or Account Years from this
Contract's Account when calculating the total number of completed Purchase
Payment Periods or Account Years in order to determine the deferred sales
charge.
Based on our actuarial determination, we do not anticipate that the deferred
sales charge will cover all sales and administrative expenses which we will
incur in connection with the Contract. Also, we do not intend to profit from
either the annual maintenance fee or the administrative expense charge, if
imposed. We do hope to profit from the daily deduction for mortality and
expense risks. Any such profit, as well as any other profit realized by us and
held in the general account (which supports insurance and Annuity obligations),
would be available for any proper corporate purpose, including, but not limited
to, payment of sales and distribution expenses.
We may reduce or eliminate the deferred sales charge if we anticipate incurring
decreased sales-related expenses due to the nature of the Plan to which the
Contract is issued. When considering a change to the deferred sales charge, we
will take into account:
(a) the size, characteristics and nature of the group to which a Contract
is issued;
(b) the expected level of initial agent or our involvement during the
establishment and maintenance of the Contract including the amount of
enrollment activity required, and the amount of maintenance required by
the Contract Holder in support of the Plan;
(c) Contract Holder involvement in conducting ongoing enrollment of
subsequently eligible Participants; and
(d) any other factors which we anticipate will affect the expenses
associated with the sale of the Contract in connection with the Plan.
PREMIUM TAX
Several states and municipalities impose a premium tax on Annuities. Currently
such taxes range up to 4%. Ordinarily, in states that do impose a premium tax,
it would be deducted from the amount applied to an Annuity option. However, we
reserve the right to deduct a state premium tax at any time from the Purchase
Payment(s) or from the Account Value based upon our determination of when such
tax is due.
CONTRACT LOANS
If a loan is elected under the Contract, the number of Accumulation Units equal
to the loan amount will be withdrawn from the Account. The withdrawal will be
made on a pro rata basis from all investment options accumulating value under
the Account. Accumulation Units taken from an Account to provide a loan do not
participate in the investment experience of the investment options from which
they were withdrawn.
If a quarterly loan repayment is not received by the due date, it will be
deemed a partial withdrawal. In this case, the amount due, plus any applicable
deferred sales charge and any applicable default charge will be deducted from
the Account. For more information about loans see the Contract Loan section of
"Contract Rights."
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ADDITIONAL WITHDRAWAL OPTIONS
GENERAL
We offer two additional withdrawal options that are not considered Annuity
options: the Estate Conservation Option ("ECO") and the Systematic Withdrawal
Option ("SWO"). These options are available to Participants whose Account value
is at least $25,000 at the time of election and are available at certain ages
as described below. Under SWO, you receive a series of partial withdrawals from
your account based on a payment method you select. It is designed for those who
want a periodic income while retaining investment flexibility for amounts
accumulating under the Contract. ECO offers the same investment flexibility as
SWO, but is designed for those who want to receive only the minimum
distribution that the Code requires each year. Under ECO, the Company
calculates the minimum distribution amount required by law and pays you that
amount once a year.
Amounts withdrawn for ECO and SWO will be deducted from the Contract in the
same manner as for any other withdrawals during the Accumulation Period except
that no deferred sales charge will be applied. (See "Contract Rights--
Withdrawals" and "Charges and Deductions--Deferred Sales Charge.")
Since ECO and SWO are not Annuity options, the Account remains in the
Accumulation Period, retains all the rights and flexibility described in this
Prospectus, and is subject to all other Contract charges. The value of the
Accumulation Units cancelled will be withdrawn proportionately from the
investment options used under the Account. We reserve the right to discontinue
the availability of these withdrawal options and to change the terms for future
elections.
Once you elect a withdrawal option, you may revoke it at any time by submitting
a written request to our Home Office. Any revocation will apply only to the
amounts not yet paid. Once ECO or SWO is revoked, it may not be elected again.
We do not allow simultaneous Contract loans and SWO payments; therefore, SWO
cannot be elected if a loan is outstanding under an Account. If a Participant
elects a loan while receiving payments under SWO, the Company will
automatically cancel future SWO payments.
SWO is different from ECO in the following ways: (1) SWO payments are made for
a fixed dollar amount, fixed time period or a fixed percentage, whereas ECO
payments vary in dollar amount and can continue indefinitely during your
lifetime, and (2) generally, SWO payments will be higher than expected ECO
payments. You should carefully assess your future income needs when considering
the election of these withdrawal options.
You should consult your tax adviser before requesting the election of these
options due to the potential for adverse tax consequences.
In the event of your death, payments may be continued if allowed by the Plan.
ESTATE CONSERVATION OPTION
The first distribution may not be made before the calendar year in which you
attain age 70 1/2.
We will calculate and distribute an annual amount using the method contained in
the Code's minimum distribution regulations. The annual distribution is
determined by dividing the prior December 31 value of the Account by a life
expectancy factor. The factor will be based on either your life expectancy or
the joint life expectancies of you and your designated beneficiary, as directed
by you, and based on tables in IRS regulations. If ECO is based on your life
expectancy, the full Account Value must be distributed in the year following
your death as required by current IRS regulations. Factors will be
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redetermined for each year's distribution. The value of the Account to be used
in this calculation is the value on the December 31st prior to the year for
which payment is being made. This calculation will be changed, if necessary, to
conform to changes in the Code or applicable regulations.
An exception is made if we maintain a separate record of your Account value as
of December 31, 1986 (for 401(a) Contracts, see Appendix IV). In this instance,
payments made in or after the year you attain age 70 1/2 but before the year
you attain age 75 will be calculated only on amounts contributed after December
31, 1986, and any earnings after that date. If you attained age 70 1/2 prior to
1988, or if you are in a governmental or church plan, you must be retired in
order to qualify for this exception. This exception will not apply if you have
received any distribution from your Account, other than distribution amounts
required under Code minimum distribution requirements.
SYSTEMATIC WITHDRAWAL OPTION
The first distribution may not be made before you attain age 59 1/2 (55 if
separated from service with the Contract Holder at or after age 55). SWO
payments are made on a monthly, quarterly, semiannual or annual basis. No
election may be made that would result in a payment of less than $250.
One of the following distribution methods may be elected:
(a) Specified Payment -- payments of a designated amount. The annual dollar
amount chosen cannot be greater than 20% of the initial current value.
The specified payment amount will remain constant unless a higher
amount is required under Code minimum distribution requirements. Each
year that the Specified Payment is in effect, we will calculate the
minimum required distribution under the Code. The minimum distribution
is determined by dividing the value of the Account by the life
expectancy factor. The value of the Account to be used in this
calculation is the value on the December 31st prior to the year for
which the payment is being made. If the dollar amount chosen is less
than the Code's minimum distribution, the Company will calculate and
pay the minimum distribution amount.
(b) Specified Period -- payments for a designated time period. The
specified period must be at least 5 years but not greater than your
life expectancy factor. Each annual distribution is determined by
dividing the Account value by the number of years remaining in the
elected period. The value to be used in this calculation is the value
on the December 31st prior to the year for which the payment is being
made. For payments made more often than annually, the annual payment
result (calculated above) is divided by the number of payments due each
year.
(c) Specified Percentage -- payments of a designated percentage. The
specified percentage chosen cannot be greater than 20% of the current
value. You may change the specified percentage elected every six
months. Each annual distribution is determined by multiplying the
Account value by the percentage chosen. The value to be used in this
calculation is the value on the December 31st prior to the year for
which the payment is being made. For payments made more often than
annually, the annual payment result (calculated above) is divided by
the number of payments due each year. Payments will be made each year
until the year during which you attain age 70 1/2.
A life expectancy factor from tables designated by the IRS will be used to
determine the minimum distribution amounts required. The factor will be based
on either your life expectancy or the joint life expectancies of you and your
designated beneficiary, as you direct. Factors will be reduced by one for each
distribution year.
ANNUITY PERIOD
ANNUITY PERIOD ELECTIONS
You must notify us in writing of the Annuity start date and Annuity option
elected. Until a date and option are elected, the Account will continue in the
Accumulation Period (for details, see the Statement of
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Additional Information). If the 403(b) Contract is subject to ERISA, you must
also submit the appropriate joint and survivor annuity waiver and spousal
consent form(s) to us.
You must give written notice to us at least 30 days before Annuity payments
begin, electing or changing (a) the date on which Annuity payments are to
begin, (b) the Annuity option, (c) whether the payments are to be made monthly,
quarterly, semiannually or annually, and (d) the investment option(s) used to
provide Annuity payments (i.e., a fixed annuity using the general account,
Aetna Variable Fund, Aetna Income Shares, Aetna Investment Advisers Fund, Inc.,
or any combination thereof). No other variable Funds may currently be used as
investment options during the Annuity Period. Once Annuity Payments begin, the
Annuity Option may not be changed, nor may transfers be made among funding
options.
If Annuity payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate (3
1/2% per annum, unless a 5% annual rate is elected). Selection of a 5% rate
causes a higher first payment, but Annuity payments will increase thereafter
only to the extent that the net investment rate exceeds 5% on an annualized
basis. Annuity payments would decline if the rate were below 5%. Use of the 3
1/2% assumed rate causes a lower first payment, but subsequent payments would
increase more rapidly or decline more slowly as changes occur in the net
investment rate.
No election may be made that would result in a first Annuity payment of less
than $20 or total yearly Annuity payments of less than $100. If the value of
the Account is insufficient to elect an option for the minimum amount
specified, a lump-sum payment must be elected.
When payments start, the age of the Annuitant plus the number of years for
which payments are guaranteed must not exceed 95.
Annuity payments may not extend beyond (a) the life of the Annuitant, (b) the
joint lives of the Annuitant and beneficiary, (c) a period certain greater than
the Annuitant's life expectancy, or (d) a period certain greater than the joint
life expectancies of the Annuitant and beneficiary.
Section 401(a)(9) of the Code has required minimum distribution rules for
403(b) Plans. Under such rules, distributions of the Account value as of
December 31, 1986, must generally begin by age 75 (for 401(a) Contracts, see
Appendix IV). Distributions of the Account value attributable to contributions
made on and after January 1, 1987, and any earnings on the entire Account after
that date must begin, for governmental and church 403(b) Plans, by April 1 of
the calendar year following the calendar year in which the Participant attains
age 70 1/2 or retires, whichever occurs later. For all other 403(b) Plans,
distributions of the above value must begin by April 1 of the calendar year
following the calendar year in which the Participant attains age 70 1/2. In
addition, distributions must be in a form and amount sufficient to satisfy the
Code requirements.
In determining the amount of benefit payments, the minimum distribution
incidental death benefit rule described in IRS regulations* must be satisfied.
This distribution rule does not apply to certain 403(b) Plans if any of the
Annuity Options under (b) below are elected with the spouse as the sole
beneficiary. See "Annuity Options."
You will be subject to a 50% federal penalty tax on the amount of distribution
required each year which is not distributed under the Code's minimum
distribution rules.
* This rule assures that any death benefits payable under the Plan are
incidental to the primary purpose of the Plan which is to provide retirement
benefits or deferred compensation to the Participant. The amount to be
distributed under this rule is determined based on the Participant's age and
tables contained in the IRS regulations.
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ANNUITY OPTIONS
LIFETIME:
(a) Life Annuity -- an Annuity with payments guaranteed to the date of the
Annuitant's death. This option may be elected with payments guaranteed
for 5, 10, 15 or 20 years. Because it provides a specified minimum
number of Annuity payments, the election of a guaranteed payment period
results in somewhat lower payments.
(b) Life Income Based Upon the Lives of Two Payees -- An Annuity will be
paid during the lives of the Annuitant and a second Annuitant. Payments
will continue until both Annuitants have died. When this option is
chosen, a choice must be made of:
(i) 100% of the payment to continue after the first death;
(ii) 66 2/3 of the payment to continue after the first death;
(iii) 50% of the payment to continue after the first death;
(iv) Payments for a minimum of 120 months, with 100% of the payment to
continue after the first death; or
(v) 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death of the
Annuitant;
Because (iv) provides a specified minimum number of Annuity payments,
the election of the guaranteed payment period results in somewhat lower
payments.
Payments under any lifetime Annuity option will be determined without regard to
the sex of the Annuitant(s). Such Annuity payments will be based solely on the
age of the Annuitant(s).
If a lifetime option is elected without a guaranteed minimum payment period, it
is possible that only one Annuity payment will be made if the Annuitant under
(a), or the surviving Annuitant under (b) should die prior to the due date of
the second Annuity payment.
Once lifetime Annuity payments begin, the Annuitant cannot elect to receive a
lump-sum settlement.
NONLIFETIME:
Under the nonlifetime option, the type of annuity (fixed or variable) and the
number of years that may be selected are determined by the investment options
used prior to annuitization.
Payments for a Specified Period -- For amounts held in the Fixed Plus
Account, an Annuity with payments to be made for at least 5 but not more
than 30 years, and the Annuity must be paid on a fixed basis. For amounts
held in the Funds, GAA, or the Fixed Account, an Annuity with payments to
be made for 3 to 30 years, as selected, on a fixed or variable basis. If
this option is elected on a variable basis, the Annuitant may request at
any time during the payment period that the present value of all or any
portion of the remaining variable payments be paid in one sum. However, any
lump-sum elected before three years of payments have been completed will be
treated as a withdrawal during the Accumulation Period and any applicable
deferred sales charge will be assessed. See "Charges and Deductions--
Deferred Sales Charge." This option is not available on a variable basis
under a Contract which provides for immediate Annuity benefits.
We make a daily deduction for mortality and expense risks from any Contract
values held on a variable basis. See "Charges and Deductions--Mortality and
Expense Risk Charges." Therefore, electing the nonlifetime option on a variable
basis will result in a deduction being made even though we assume no mortality
risk.
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In addition to the Annuity options described above, we may make other payment
options available to you and other payees.
DEATH BENEFIT
ACCUMULATION PERIOD:
A portion or all of any death proceeds may be (a) paid to the beneficiary in a
lump sum; (b) applied under any of the Annuity Options; (c) subject to
applicable provisions of the Code, left in the variable investment options;
(d) if the beneficiary is your spouse, paid under SWO or ECO; or (e) subject to
applicable provisions of the Code, left on deposit in our general account with
the beneficiary electing to receive monthly, quarterly, semiannual or annual
interest payments at the interest rate then currently being credited on such
deposits (the balance on deposit can be withdrawn at any time or applied to an
Annuity Options). Any lump-sum payment paid during the Accumulation Period will
normally be made within seven calendar days after proof of death acceptable to
us and a request for payment are received at our Home Office.
Until the election of method of payment, amounts will remain invested as they
were before the death, and the beneficiary will assume all nonforfeitable
rights under the Contract. The Code requires that distributions begin within a
certain time period. If your beneficiary is your surviving spouse, he or she
has until you would have attained age 70 1/2 to begin Annuity payments, to
receive a lump-sum distribution, or to begin receiving distributions under ECO
or SWO. If your beneficiary is not your surviving spouse, either Annuity
payments must begin by December 31 of the year following the year of your
death, or the entire value must be distributed by December 31 of the fifth year
following the year of your death. In no event may payments to any beneficiary
extend beyond the life of the beneficiary or any period certain greater than
the beneficiary's life expectancy. If no elections are made concerning
distribution, no distributions will be made. Failure to commence distribution
within the above time periods can result in tax penalties.
If a lump-sum distribution is elected, the beneficiary will receive the value
of the Account determined as of the Valuation Period in which proof of death
acceptable to us and a request for payment are received at the Home Office. If
an Annuity Option is elected, the value applied to the Annuity Option is
determined in the same manner as a lump-sum distribution; the amount of payout
will depend on the annuity option elected and the investment option(s) used to
provide such payments. See "Annuity Period." If amounts are left in the
variable investment options, the account value will continue to be affected by
the investment performance of the investment option(s) selected. If amounts are
left on deposit in the general account, the principal amount is guaranteed but
interest payments may vary. In general, regardless of the method of payment,
payments received by your beneficiaries after your death are taxed in the same
manner as if you had received those payments. (See "Tax Status.")
ANNUITY PERIOD
If an Annuitant dies after Annuity payments have begun, any death benefit
payable will depend upon the terms of the Contract and the Annuity option
selected.
If lifetime option (a) or (b) was elected without a guaranteed minimum payment
period under the Contract, Annuity payments will cease upon the death of the
Annuitant under a Life Annuity or the death of the surviving Annuitant under
options (b)(i), (ii), (iii) or (v).
Under the Contract, if lifetime option (a) or (b) was elected with a guaranteed
minimum payment period and the death of the second Annuitant under option (a)
or the surviving Annuitant under option (b)(iv) occurs prior to the end of that
period, we will pay to the designated beneficiary in a lump sum, unless
otherwise requested, the present value of the guaranteed Annuity payments
remaining. Such value will be determined as of the Valuation Period in which
proof of death acceptable to us and a request for payment are received at our
Home Office. The value will be reduced by any payments made after the date of
death.
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If the nonlifetime option was elected under the Contract and the Annuitant dies
before all payments are made, the value of any remaining payments may be paid
in a lump sum to the beneficiary, and no deferred sales charge will be imposed.
Such value will be determined as of the Valuation Period in which proof of
death acceptable to us and a request for payment are received at our Home
Office.
Any lump sum payment paid under the applicable lifetime or nonlifetime Annuity
options will normally be made within seven calendar days after proof of death
acceptable to us, and a request for payment are received at our Home Office.
If the Annuitant dies after Annuity payments have begun and if there is a death
benefit payable under the Annuity option elected, the remaining value must be
distributed to the beneficiary at least as rapidly as under the original method
of distribution.
TAX STATUS
INTRODUCTION
The following discussion is a general discussion of federal income tax
considerations relating to the Contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all
of the situations in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon the Company's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("IRS"). No representation is made as to the
likelihood of the continuation of the present federal income tax laws or of the
current interpretation by the IRS. Moreover, no attempt has been made to
consider any applicable state or other tax laws.
The Contract may be purchased and used in connection with certain retirement
arrangements entitled to special income tax treatment under Section 403(b) of
the Code. For 401(a) Plans, see Appendix IV. The ultimate effect of federal
income taxes on the amounts held under a Contract, or Annuity Payments, and on
the economic benefit to the Contract Owner, the Annuitant, or the Beneficiary
may depend on the tax status of the individual concerned.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under Part I of Subchapter L
of the Code. Since the Separate Account is not an entity separate from the
Company, and its operation forms a part of the Company, it will not be taxed
separately as a "regulated investment company" under Subchapter M of the Code.
Investment income and realized capital gains are automatically applied to
increase reserves under the Contracts. Under existing federal income tax law,
the Company believes that the Separate Account investment income and realized
net capital gains will not be taxed to the extent that such income and gains
are applied to increase the reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the
Company being taxed on income or gains attributable to the Separate Account,
then the Company may impose a charge against the Separate Account (with respect
to some or all Contracts) in order to set aside provisions to pay such taxes.
TAX STATUS OF THE CONTRACT (403(B) PLANS ONLY. FOR A DISCUSSION OF 401 PLANS,
SEE APPENDIX IV.)
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In
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those circumstances, income and gains from the separate account assets would be
includible in the variable contract owner's gross income. One of the
circumstances that has raised this issue is the number of funding options
available under the Contract. The Company reserves the right to modify the
Contract as necessary to attempt to prevent an Owner from being considered the
owner of a pro rata share of the assets of the Separate Account.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
IN GENERAL. The Contract is designed for use with Section 403(b) plans. The tax
rules applicable to participants and beneficiaries in retirement plans vary
according to the type of plan and the terms and conditions of the plan. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances.
The Company makes no attempt to provide more than general information about use
of the Contracts with the various types of retirement plans. Owners and
participants under retirement plans as well as annuitants and beneficiaries are
cautioned that the rights of any person to any benefits under the Contracts may
be subject to the terms and conditions of the plans themselves, regardless of
the terms and conditions of the Contract issued in connection with such a plan.
Some retirement plans are subject to distribution and other requirements that
are not incorporated in the administration of the Contracts. Owners are
responsible for determining that contributions, distributions and other
transactions with respect to the Contracts satisfy applicable law. Purchasers
of Contracts for use with any retirement plan should consult their legal
counsel and tax adviser regarding the suitability of the Contract.
SECTION 403(B) PLANS. Under Code section 403(b), payments made by public school
systems and certain tax exempt organizations to purchase annuity contracts for
their employees are excludable from the gross income of the employee, subject
to certain limitations. However, these payments may be subject to FICA (Social
Security) taxes. A Contract issued as a tax-deferred annuity under section
403(b) will be amended as necessary to conform to the requirements of the Code.
In order to be excludible from your taxable income, your total annual
contributions to section 403(b) plans cannot exceed either of two limits set by
the Code. The first limit, under section 415, is generally the lesser of 25
percent of your compensation or $30,000. This limits applies to all your own
contributions, your employer's contributions under the Plan on your behalf,
and, if you are in control of the employer as defined in the Code,
contributions under certain other retirement plans. The second limit, which is
the exclusion allowance under section 403(b) of the Code, is usually calculated
according to a formula that takes account of your length of employment, any
pretax contributions you and your employer have already made under the Plan,
and pretax contributions to certain other retirement plans. There is also a
third limit that specifically limits your salary reduction contributions to the
Plan to no more than $9,500 annually (subject to indexing); your own limit may
be lower.
Code section 403(b)(11) restricts the distribution under Code section 403(b)
annuity contracts of: (1) elective contributions made in years beginning after
December 31, 1988; (2) earnings on those contributions; and (3) earnings in
such years on amounts held as of the last year beginning before January 1,
1989. Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
The Code also has required distribution rules for section 403(b) plans.
Distributions of amounts as of December 31, 1986, generally must begin by age
75. Distributions attributable to contributions made on or after January 1,
1987, and any earnings on the entire Account on or after that date, must begin
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by (1) for governmental or church plans, April 1 of the calendar year following
the calendar year in which the participant attains age 70 1/2 or retires,
whichever occurs later, or (2) for all other plans, April 1 of the calendar
year following the calendar year in which the participant attains age 70 1/2.
To comply with these provisions, distributions must be in a form and amount
sufficient to satisfy the minimum distribution and minimum distribution
incidental death benefit rules specified in IRS regulations. In general,
annuity payments may not extend beyond your life, the joint lives of you and
your Beneficiary, a period certain greater than your life expectancy, or a
period certain greater than the joint life expectancies of you and your
beneficiary. If you die after the required minimum distributions have
commenced, distributions to your beneficiary must be made at least as rapidly
as under the method of distribution in effect at the time of your death. If you
die before the required minimum distributions have commenced, distribution to
your beneficiary generally must either commence as an annuity within one year
or be completed within five years, subject to certain special rules. If
distributions are taken in excess of the minimum required distribution, the
Company will no longer maintain the grandfathered amount.
All distributions will be taxed as they are received unless you made a rollover
contribution of the distribution to another section 403(b) plan or an
individual retirement annuity/account ("IRA") in accordance with the Code, or
unless you have made after tax contributions to the plan, which are not taxed
upon distribution. The Code has specific rules that apply, depending on the
type of distribution received, if after-tax contributions were made.
In general, payments received by your beneficiaries after your death are taxed
in the same manner as if you had received those payments, except that a limited
death benefit exclusion may apply.
Pension and annuity distributions generally are subject to withholding for the
recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients generally are
provided the opportunity to elect not to have tax withheld from distributions;
however, certain distributions from Section 403(b) tax-deferred annuities are
subject to mandatory federal income tax withholding. We will report to the IRS
the taxable portion of all distributions.
The Code imposes a 10% penalty tax on the taxable portion of any distribution
unless made when (a) you have attained age 59 1/2, (b) you have become
disabled, (c) you have died, (d) you have attained age 55 and have separated
from service with the plan sponsor, (e) the distribution amount is rolled over
into another section 403(b) plan or an IRA in accordance with the terms of the
Code, or (f) the distribution amount is annuitized over your life or life
expectancy or the joint lives or life expectancies of you and your plan
beneficiary, provided you have separated from service with the plan sponsor at
or after age 55. In addition, the penalty tax is abated for the amount of a
distribution equal to unreimbursed medical expenses incurred by you that
qualify for deduction as specified in the Code. The Code may impose other
penalty taxes in other circumstances.
POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely modified
the federal taxation of certain annuities. Although as of the date of this
prospectus Congress is not actively considering any legislation regarding the
taxation of annuities, there is always the possibility that the tax treatment
of annuities could change by legislation or other means (such as IRS
regulations, revenue rulings, judicial decisions, etc.). Moreover, it is also
possible that any change could be retroactive (that is, effective prior to the
date of the change).
OTHER TAX CONSEQUENCES
As noted above, the foregoing discussion of the federal income tax consequences
is not exhaustive and special rules are provided with respect to other tax
situations not discussed in this Prospectus.
34
<PAGE>
Further, the federal income tax consequences discussed herein reflect the
Company's understanding of the current law and the law may change. Federal
estate and gift tax consequences of ownership or receipt of distributions under
the Contract depend on the individual circumstances of each Owner or recipient
of a distribution. A competent tax adviser should be consulted for further
information.
MISCELLANEOUS
VOTING RIGHTS
Each Contract Holder may direct us in the voting of shares at meetings of
shareholders of the appropriate Fund(s). The number of votes to which each
Contract Holder may give direction will be determined as of the record date.
The number of votes each Contract Holder is entitled to direct with respect to
a particular Fund during the Accumulation Period is equal to the portion of the
current value of the Contract attributable to that Fund, divided by the net
asset value of one share of that Fund. During the Annuity Period, the number of
votes is equal to the Valuation Reserve applicable to the portion of the
Contract attributable to that Fund, divided by the net asset value of one share
of that Fund. In determining the number of votes, fractional votes will be
recognized. Where the value of the Contract or Valuation Reserve relates to
more than one Fund, the calculation of votes will be performed separately for
each Fund.
Participants and Annuitants have a fully vested (100%) interest in the benefits
provided under the Contract. Therefore, Participants and Annuitants may
instruct the Contract Holder how to direct us to cast the votes for the portion
of the Contract value or Valuation Reserve attributable to their Individual
Accounts. Votes attributable to those Participants and Annuitants who do not
instruct the Contract Holder will be cast by us in the same proportion as votes
for which instructions have been received by the Contract Holder. Votes
attributable to Contract Holders who do not direct us will be cast by us in the
same proportion as the votes for which we have received directions.
Participants and Annuitants entitled to instruct the casting of votes for a
particular Fund will receive a notice of each meeting of shareholders of that
Fund, together with any proxy solicitation materials, and a statement of the
number of votes attributable to their participation under the Contract and
stating the right to instruct the Contract Holder how such votes shall be cast.
MODIFICATION OF THE CONTRACT
The Company may modify the Contract when it deems an amendment appropriate,
subject to the limitations described below, by notifying the Contract Holder in
writing 30 days before the effective date of the change, with the Contract
Holder's consent. Changes to the following Contract provisions may be
considered material by the Company and cannot be changed without the approval
of appropriate state or federal regulatory authorities:
(a) transfers among investment options;
(b) notification to the Contract Holder;
(c) conditions governing payments of withdrawal values;
(d) terms of Annuity Options;
(e) death benefit payments; and
(f) maintenance fee provisions.
In addition, changes to the items listed below will apply only to future
Accounts:
(a) the Annuity options (such changes may only be made twelve months after
the Effective Date of the Contract and twelve months after the
Effective Date of any such prior changes),
35
<PAGE>
(b) the contractual promise that no deduction will be made from Purchase
Payment(s) for sales or administrative expenses,
(c) increasing the deferred sales charge, if applicable,
(d) increasing the mortality and expense risk charges,
(e) increasing the administrative expense charge provision, and
(f) increasing the annual maintenance fee.
If the Contract Holder has not accepted the proposed change at the time of its
effective date, we will discontinue establishing new Accounts and we reserve
the right to discontinue accepting Purchase Payments to existing Accounts.
Modification of items (b) through (f) above specifically require authorization
by the SEC to the extent that the proposed charges are not currently authorized
by existing orders issued to us by the SEC. We may also change any provision
that must be altered to comply with state or federal law.
Once an Annuity has begun, we will not change the terms or the amount of the
Annuity payments, unless a change is deemed necessary to comply with Code
requirements or other laws and regulations affecting the Plan or Contract.
CONTRACT HOLDER/PARTICIPANT INQUIRIES
A Contract Holder or Participant may direct inquiries to a local representative
of the Distributor or may write directly to us at the address shown on the
cover page of this prospectus.
TELEPHONE TRANSFERS
You automatically have the right to make transfers among Funds by telephone.
The Company has enacted procedures to prevent abuses of Account transactions by
telephone. The procedures include requiring the use of a personal
identification number (PIN) to execute transactions. You are responsible for
safeguarding your PIN, and for keeping Account information confidential. If the
Company fails to follow its procedures, it would be liable for any losses to
your Account resulting from the failure. To ensure authenticity, we record all
calls on the 800 line. Note: all Account information and transactions permitted
are subject to the terms of the Plan(s).
BENEFICIARY DESIGNATIONS
Unless otherwise requested, the following applies to your beneficiary
designation:
If you designate more than one beneficiary, the death benefit payments will be
paid in equal amounts to the primary beneficiaries. If no primary beneficiaries
survive the Participant or Annuitant, the payments will be made to the
contingent beneficiaries.
If no beneficiary survives the Participant or Annuitant, payments will be made
to the executor or administrator of the Participant or Annuitant.
You may elect a class of beneficiaries by listing the names of currently living
members of the class and the class designation. For example, for "children of
the Participant," list the children and add "and any other children of the
Participant." If a class of beneficiaries is designated, payments will be made
in equal amounts to each living person who is a member of the class, whether or
not he or she was specifically named.
TRANSFER OF OWNERSHIP; ASSIGNMENT
Unless contrary to applicable law, assignment of the Contract or Account is
prohibited.
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<PAGE>
LEGAL PROCEEDINGS
We know of no material legal proceedings pending to which the Separate Account
is a party or which would materially affect the Separate Account.
LEGAL MATTERS
The validity of the securities offered by this Prospectus has been passed upon
by Susan E. Bryant, Esq., Counsel to the Company.
37
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION -- TABLE OF CONTENTS
The following items are the contents of the Statement of Additional
Information:
<TABLE>
<S> <C>
General Information and History............................................. 2
Variable Annuity Account C.................................................. 2
Offering and Purchase of Contracts.......................................... 3
Performance Data............................................................ 3
General ................................................................... 3
Average Annual Total Return Quotations..................................... 4
Annuity Payments............................................................ 7
Dollar-Cost Averaging....................................................... 8
Sales Material.............................................................. 8
Independent Auditors........................................................ 9
Financial Statements of the Separate Account................................ S-1
Financial Statements of Aetna Life Insurance and Annuity Company............ F-1
</TABLE>
38
<PAGE>
APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
THE GUARANTEED ACCUMULATION ACCOUNT ("GAA") IS A CREDITED INTEREST OPTION
AVAILABLE DURING THE ACCUMULATION PERIOD UNDER THE CONTRACTS. YOU AND THE
CONTRACT HOLDER SHOULD READ THE ACCOMPANYING GAA PROSPECTUS CAREFULLY BEFORE
INVESTING. THIS APPENDIX IS A SUMMARY OF GAA AND IS NOT INTENDED TO REPLACE THE
GAA PROSPECTUS. AMOUNTS ALLOCATED TO GAA ARE HELD IN A NONINSULATED,
NONUNITIZED SEPARATE ACCOUNT.
GAA is a credited interest option in which we guarantee stipulated rates of
interest for stated periods of time on amounts directed to GAA. The interest
rate stipulated is an annual effective yield; that is, it reflects a full
year's interest. Interest is credited daily at a rate that will provide the
guaranteed annual effective yield over the period of one year. This option
guarantees the minimum interest rate specified in the Contract.
During a specified period of time, amounts may be applied to any or all
available Guaranteed Terms within the Short-Term and Long-Term Classifications.
The Short-Term Classification consists of all Guaranteed Terms of 3 years or
less and the Long-Term Classification consists of all Guaranteed Terms of 10
years or less, but greater than 3 years.
Withdrawals or transfers from a Guaranteed Term before the end of that
Guaranteed Term may be subject to a Market Value Adjustment ("MVA"). An MVA
reflects the change in the value of the investment due to changes in interest
rates since the date of deposit. When interest rates increase after the date of
deposit, the value of the investment decreases, and the MVA is negative.
Conversely, when interest rates decrease after the date of deposit, the value
of the investment increases, and the MVA is positive. It is possible that a
negative MVA could result in the Participant receiving an amount which is less
than the amount paid into GAA.
As a Guaranteed Term matures assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to the other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to a
deferred sales charge and/or tax penalties and/or withholding.
By notifying us at our Home Office at least 30 days before Annuity payments
begin, you may elect to have amounts that have been accumulating under GAA
transferred to one or more of the Funds available during the Annuity Period to
provide variable Annuity payments. GAA cannot be used as an investment option
during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and expense
risks; these risks are considered in determining the credited rate.
TRANSFERS
Amounts applied to a Guaranteed Term during a deposit period may not be
transferred to any other funding option or to another Guaranteed Term during
that deposit period or for 90 days after the close of that deposit period.
Transfers are permitted from Guaranteed Terms of one Classification to
available Guaranteed Terms of another Classification. We will apply an MVA to
GAA transfers made before the end of a Guaranteed Term. Transfers of GAA values
due to a maturity are not subject to an MVA.
CONTRACT LOANS
Loans may not be made against amounts held in GAA, although such value is
included in determining the value of the Account against which a loan may be
made.
REINVESTMENT PRIVILEGE
Any amounts reinvested in GAA will be applied to the current deposit period.
Amounts are proportionately reinvested to the Classifications in the same
manner as they were allocated before the withdrawal. Any negative MVA amount
applied to a withdrawal is not included in the reinvestment.
39
<PAGE>
APPENDIX II
FIXED ACCOUNT
THE FIXED ACCOUNT IS AN INVESTMENT OPTION AVAILABLE DURING THE ACCUMULATION
PERIOD UNDER THE CONTRACTS. THE FOLLOWING SUMMARIZES MATERIAL INFORMATION
CONCERNING THE FIXED ACCOUNT THAT IS OFFERED AS AN OPTION UNDER THE CONTRACT.
ADDITIONAL INFORMATION MAY BE FOUND IN YOUR CERTIFICATE. AMOUNTS ALLOCATED TO
THE FIXED ACCOUNT ARE HELD IN THE COMPANY'S GENERAL ACCOUNT THAT SUPPORTS
INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN THE FIXED ACCOUNT HAVE NOT BEEN
REGISTERED WITH THE SEC IN RELIANCE ON EXEMPTIONS UNDER THE SECURITIES ACT OF
1933, AS AMENDED. DISCLOSURE IN THIS PROSPECTUS REGARDING THE FIXED ACCOUNT,
HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE
FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND COMPLETENESS OF THE
STATEMENTS. DISCLOSURE IN THIS APPENDIX REGARDING THE FIXED ACCOUNT HAS NOT
BEEN REVIEWED BY THE SEC.
This option guarantees that amounts allocated to this option will earn the
minimum interest rate specified in the Contract. We may credit a higher
interest rate from time to time. The Company's determination of interest rates
reflects the investment income earned on invested assets and the amortization
of any capital gains and/or losses realized on the sale of invested assets.
Under this option, we assume the risk of investment gain or loss by
guaranteeing Net Purchase Payment values and promising a minimum interest rate
and Annuity payment. This option is available under installment Purchase
Payment Contracts only.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to 6 months or (b) as provided by
federal law.
Amounts applied to the Fixed Account will earn the interest rate in effect when
actually applied to the Fixed Account.
MORTALITY AND EXPENSE RISK CHARGES
The Fixed Account will reflect a compound interest rate credited by us. The
interest rate quoted is an annual effective yield. We make no deductions from
the credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
If a withdrawal is made from the Fixed Account, a deferred sales charge may
apply. See "Charges and Deductions--Deferred Sales Charge."
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers from the Fixed Account to any other available investment option(s)
are allowed in each calendar year during the Accumulation Period. The amount
which may be transferred may vary at our discretion; however, it will never be
less than 10% of the amount held under the Fixed Account. Transfers to the
Fixed Plus Account (if available under the Contract) will be permitted without
regard to this limitation.
ANNUITIZATIONS
By notifying us at our Home Office at least 30 days before Annuity payments
begin, you may elect to transfer amounts which have been accumulating under the
Fixed Account transferred to one or more of the funds available during the
Annuity Period to provide variable Annuity payments.
CONTRACT LOANS
Loans may be made from those Account values held in the Fixed Account.
40
<PAGE>
APPENDIX III
FIXED PLUS ACCOUNT
THE FIXED PLUS ACCOUNT IS AN INVESTMENT OPTION AVAILABLE DURING THE
ACCUMULATION PERIOD UNDER THE CONTRACTS. THE FOLLOWING SUMMARIZES MATERIAL
INFORMATION CONCERNING THE FIXED ACCOUNT THAT IS OFFERED AS AN OPTION UNDER THE
CONTRACT. ADDITIONAL INFORMATION MAY BE FOUND IN YOUR CERTIFICATE. AMOUNTS
ALLOCATED TO THE FIXED PLUS ACCOUNT ARE HELD IN THE COMPANY'S GENERAL ACCOUNT
THAT SUPPORTS INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN THE FIXED PLUS
ACCOUNT HAVE NOT BEEN REGISTERED WITH THE SEC IN RELIANCE ON EXEMPTIONS UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE IN THIS PROSPECTUS REGARDING
THE FIXED PLUS ACCOUNT, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF THE STATEMENTS. DISCLOSURE IN THIS APPENDIX REGARDING THE FIXED
PLUS ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
This option guarantees that amounts allocated to this option will earn the
minimum Fixed Plus interest rate specified in the Contract. We may credit a
higher interest rate from time to time. The Company's determination of interest
rates reflects the investment income earned on invested assets and the
amortization of any capital gains and/or losses realized on the sale of
invested assets. Under this option, we assume the risk of investment gain or
loss by guaranteeing Net Purchase Payment values and promising a minimum
interest rate and Annuity payment.
The Fixed Plus Account will reflect a compound interest rate credited by us.
The interest rate quoted is an annual effective yield. Amounts applied to the
Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
Beginning on the tenth Account Year, we will credit amounts held in the Fixed
Plus Account with an interest rate that is at least 0.25% higher than the then-
declared interest rate for the Fixed Plus Accounts for Accounts that have not
reached their tenth anniversary.
The Company reserves the right to limit Net Purchase Payment(s) and/or
transfers to the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day our Home Office receives a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loan or
annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due the election of SWO or ECO.
The 20% limit is waived if the partial withdrawal is due to annuitization or
death. The waiver upon death will only be exercised once and must occur within
6 months after the Participant's date of death. Any such surrender or
annuitization must also be made pro rata from all funding options.
If a full withdrawal is requested, we will pay any amounts held in the Fixed
Plus Account, with interest, in five annual payments of:
. One-fifth of the Fixed Plus Account value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers, loan or
annuitizations made in the prior 12 months;
. One-fourth of the remaining Fixed Plus Account value 12 months later;
. One-third of the remaining Fixed Plus Account value 12 months later;
. One-half of the remaining Fixed Plus Account value 12 months later; and
. The balance of the Fixed Plus Account value 12 months later.
41
<PAGE>
Once we receive a request for a full withdrawal from an Account, no further
withdrawals, loan or transfers will be permitted from the Fixed Plus Account.
A full withdrawal from the Fixed Plus Account may be cancelled at any time
before the end of the five-payment period.
We will waive the Fixed Plus Account full withdrawal provision if a full
withdrawal is made due to:
(a) the Participant's death, before Annuity payments begin;
(b) the election of an Annuity option; or
(c) if the Fixed Plus Account value is $3,500 or less and no withdrawals,
transfers, loan or annuitizations have been made from the Account
within the prior 12 months.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day our Home Office receives a
written request, reduced by any Fixed Plus Account withdrawals, transfers, loan
or annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of SWO or ECO.
The 20% limit on transfers will be waived when the value in the Fixed Plus
Account is $1,000 or less.
SWO
The Systematic Withdrawal Option may not be elected if you have requested a
Fixed Plus Account transfer or withdrawal within the prior 12 month period.
ANNUITIZATIONS
By notifying us at our Home Office at least 30 days before Annuity payments
begin, you may elect to have amounts which have been accumulating under the
Fixed Plus Account transferred to one or more of the funds available during the
Annuity Period to provide lifetime variable Annuity payments.
CONTRACT LOANS
Loans may be made from the Account Values held in the Fixed Plus Account.
42
<PAGE>
APPENDIX IV
401(A) DEFINED CONTRIBUTION PLANS
THE COMPANY HAS MADE THE FOLLOWING CHANGES DESCRIBED IN THIS PROSPECTUS SO THAT
A SEPARATE CONTRACT MAY BE OFFERED TO CONTRACT HOLDERS WHO WISH TO MAKE THEIR
PURCHASE PAYMENTS OR ROLLOVER CONTRIBUTIONS FROM CONTRIBUTIONS MADE TO A
QUALIFIED DEFINED CONTRIBUTION PLAN UNDER SECTION 401(A) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED ("CODE"). EXCEPT AS NOTED BELOW, THE 401(A)
CONTRACT SHALL HAVE THE SAME PROVISIONS AS THOSE DESCRIBED IN THIS PROSPECTUS.
GENERAL
Where the prospectus references 403(b) or tax-deferred annuity plans, these
references are replaced with the terms 401(a) or qualified plans.
PURCHASE OF CONTRACT
The following paragraph replaces the last paragraph under the section entitled
"Purchase--Contract Purchase":
The Code imposes a maximum limit on annual Purchase Payments that may
be excluded from a Participant's gross income. Such limit must be
calculated under the Plan by the Contract Holder in accordance with
Section 415 of the Code. In addition, Purchase Payments will be
excluded from a Participant's gross income only if the 401(a) Plan
meets certain nondiscrimination requirements.
WITHDRAWALS
The withdrawal restrictions imposed by the Code Section 403(b)(11) do not apply
to 401(a) plans. Please disregard the section detailing these restrictions in
the section entitled "Withdrawals."
CONTRACT LOANS
Contract loans are not available under 401(a) plans. Please disregard the
entire section entitled "Contract Loans."
ADDITIONAL WITHDRAWAL OPTIONS
Under ECO, the exception describing special rules when the Company maintains a
separate record of the Participant's Account value as of December 31, 1986,
does not apply to 401(a) plans.
ANNUITY PERIOD ELECTIONS
The following paragraph replaces the seventh paragraph under the section
entitled "Annuity Period Elections":
Section 401(a)(9) of the Code has required minimum distribution rules
for 403(b) Plans. Under such rules, distribution of the entire Account
value must be made, or must begin no later than April 1 of the calendar
year following the calendar year in which the Participant attains age
70 1/2. However, for Participants in governmental or church plans, or
for Participants who attained age 70 1/2 prior to January 1, 1988,
distribution must be made, or begin by April 1 of the calendar year
following the calendar year in which the Participant attains age 70 1/2
or retires, whichever occurs later. In addition, distributions must be
in a form and amount sufficient to satisfy the Code requirements.
TAX STATUS
The following section replaces the section entitled "Contracts Used with
Certain Retirement Plans."
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
IN GENERAL. The Contract is designed for use with certain types of retirement
plans that qualify under Section 401(a) of the Code. The tax rules applicable
to participants and beneficiaries in retirement plans
43
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vary according to the type of plan and the terms and conditions of the plan.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; aggregate distributions in excess
of a specified annual amount; and in other specified circumstances.
The Company makes no attempt to provide more than general information about use
of the Contracts with the various types of retirement plans. Owners and
participants under retirement plans as well as annuitants and beneficiaries are
cautioned that the rights of any person to any benefits under the Contracts may
be subject to the terms and conditions of the plans themselves, regardless of
the terms and conditions of the Contract issued in connection with such a plan.
Some retirement plans are subject to distribution and other requirements that
are not incorporated in the administration of the Contracts. Owners are
responsible for determining that contributions, distributions and other
transactions with respect to the Contracts satisfy applicable law. Purchasers
of Contracts for use with any retirement plan should consult their legal
counsel and tax adviser regarding the suitability of the Contract.
CORPORATE PENSION AND PROFIT-SHARING PLANS AND H.R. 10 PLANS. Code section
401(a) permits employers to establish various types of retirement plans for
employees, and permit self-employed individuals to establish retirement plans
for themselves and their employees. These retirement plans may permit the
purchase of the Contracts to accumulate retirement savings under the plans.
Adverse tax consequences to the plan, to the participant or to both may result
if this Contract is assigned or transferred to any individual as a means to
provide benefit payments.
In the case of a withdrawal under a Contract paid to a plan participant or
beneficiary, including withdrawals under the Systematic Withdrawal Option or
the Estate Conservation Option, a ratable portion of the amount received is
taxable, generally based on the ratio of the "investment in the contract" to
the individual's total accrued benefit under the retirement plan. The
"investment in the contract" generally equals the amount of any non-deductible
contributions paid by or on behalf of any individual's total accrued benefit
under the retirement plan. The "investment in the contract" generally equals
the amount of any non-deductible contributions paid by or on behalf of any
individual. For a Contract issued in connection with qualified plans, the
"investment in the contract" can be zero. Special tax rules may be available
for certain distributions from a qualified plan.
Although the tax consequences may vary depending on the Annuity payment elected
under the Contract, in general, only the portion of the Annuity payment that
represents the amount by which the Account Value exceeds the "investment in the
contract" will be taxed; after the "investment in the contract" is recovered,
the full amount of any additional Annuity payments is taxable. For Variable
Annuity payments, the taxable portion is generally determined by an equation
that establishes a specific dollar amount of each payment that is not taxed.
The dollar amount is determined by dividing the "investment in the contract" by
the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her "investment in the contract". For Fixed Annuity payments, in
general there is no tax on the portion of each payment which represents the
same ratio that the "investment in the contract" bears to the total expected
value of the Annuity payments for the term of the payments; however, the
remainder of each Annuity payment is taxable. Once the "investment in the
contract" has been fully recovered, the full amount of any additional Annuity
payments is taxable. If Annuity payments cease as a result of an Annuitant's
death before full recovery of the "investment in the contract," consult a
competent tax advisor regarding deductibility of the unrecovered amount.
Pension distributions generally are subject to withholding for the recipient's
federal income tax liability at rates that vary according to the type of
distribution and the recipient's tax status. Recipients generally are provided
the opportunity to elect not to have tax withheld from distributions. However,
certain distributions are subject to mandatory federal income tax withholding.
44
<PAGE>
HYPOTHETICAL TABLES
The following tables represent hypothetical values for the periods indicated
that would have resulted under a Contract described in this Prospectus had you
made contributions to the Contract during the periods indicated. Each set of
hypothetical results is based exclusively on the investment performance of a
particular Fund during the periods shown. The Fund performance is based on the
actual net asset values of the various Funds which would be net of advisory
fees and expenses actually charged for those periods. Some of the Funds'
advisers have reimbursed the Funds for a portion of those fees. Reimbursements
may not continue in the future. The hypothetical returns also assume deduction
of all charges and expenses under the Contracts which include 1.25% mortality
and expense risk charges and a $20.00 maintenance fee which is assumed to be
deducted on the last day of each Contract Year. The Accumulation Vallue is net
of all applicable fees and expenses of the Fund and under the Contract, except
the deferred sales charges. The Withdrawal Value is net of all applicable fees
and expenses of the Fund and under the Contract, including deferred sales
charges.
Since the Contracts are designed to fund variable retirement benefits through
long-term investments, "active" Contracts will, on the average, involve a long-
term relationship between the Company and the Contract Holder during both the
Accumulation and Annuity Periods. Accordingly, the Tables are intended to
illustrate the hypothetical values of each Fund since that Fund became
available under the Contract. For those Funds not available under the Contract
as of December 31, 1994, no histories are shown.
Generally, Table 1 for each Fund shows the accumulation value at annual
intervals following contract issuance on the date indicated, and Table 2 shows
the accumulation value at quarterly intervals following contract issuance.
Table 1 assumes that monthly purchase payments of $100 were made during each
Contract Year following contract issuance, and illustrates the accumulation
value of such payment over a period of time, as well as the actual withdrawal
value of your account following the deduction of any applicable deferred sales
charge that would have been assessed had a withdrawal been made during that
period. Table 2 assumes that a single net purchase payment of $100 was made at
contract issuance, and illustrates the accumulation value of that payment at
quarterly intervals thereafter.
For those Funds available during annuity payout (e.g., Aetna Variable Fund,
Aetna Income Shares and Aetna Investment Advisers Fund, Inc.), Table 3
illustrates the value of hypothetical monthly variable annuity payments at
quarterly intervals following the commencement of annuity payments on the date
indicated. Table 3 assumes an initial annuity payment of $100. For those funds
not available as funding options during the Annuity Period, no annuity payout
information is provided.
PLEASE NOTE THAT AMOUNTS WITHDRAWN BEFORE YOU REACH AGE 59 1/2 MAY BE SUBJECT
TO A 10% FEDERAL PENALTY TAX. (SEE THE SECTION ENTITLED "TAX STATUS" IN THIS
PROSPECTUS.)
PLEASE ALSO NOTE THAT WHILE THESE HYPOTHETICAL CHARTS REFLECT ACTUAL HISTORICAL
PERFORMANCE, THEY ARE NOT INDICATIVE OF FUTURE RESULTS. A PROGRAM OF THE TYPE
ILLUSTRATED IN THE TABLES DOES NOT ASSURE A PROFIT OR PROTECT AGAINST
DEPRECIATION IN DECLINING MARKETS.
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<PAGE>
AETNA VARIABLE FUND
HYPOTHETICAL PERIODIC ACCUMULATION VALUES AND ANNUITY PAYMENTS
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1984
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1985 $ 1,200.00 $ 20.00 $ 1,367.23 $ 68.36 $ 1,298.87
----------------------------------------------------------------------------
December 1986 2,400.00 40.00 2,846.99 142.35 2,704.64
----------------------------------------------------------------------------
December 1987 3,600.00 60.00 4,039.49 201.97 3,837.52
----------------------------------------------------------------------------
December 1988 4,800.00 80.00 5,811.72 290.59 5,521.13
----------------------------------------------------------------------------
December 1989 6,000.00 100.00 8,731.84 349.27 8,382.57
----------------------------------------------------------------------------
December 1990 7,200.00 120.00 10,130.50 405.22 9,725.28
----------------------------------------------------------------------------
December 1991 8,400.00 140.00 13,972.92 419.19 13,553.73
----------------------------------------------------------------------------
December 1992 9,600.00 160.00 15,964.73 478.94 15,485.79
----------------------------------------------------------------------------
December 1993 10,800.00 180.00 18,055.81 361.12 17,694.69
----------------------------------------------------------------------------
December 1994 12,000.00 200.00 18,828.60 0.00 18,828.60
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1984
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1985 $107.70 September 1988 $176.76 March 1992 $284.68
-------------------------------------------------------------------------------------
June 1985 116.79 December 1988 179.67 June 1992 286.43
-------------------------------------------------------------------------------------
September 1985 112.94 March 1989 191.77 September 1992 296.11
-------------------------------------------------------------------------------------
December 1985 129.66 June 1989 204.95 December 1992 307.24
-------------------------------------------------------------------------------------
March 1986 145.11 September 1989 222.25 March 1993 312.71
-------------------------------------------------------------------------------------
June 1986 153.04 December 1989 229.00 June 1993 309.99
-------------------------------------------------------------------------------------
September 1986 144.06 March 1990 223.82 September 1993 316.15
-------------------------------------------------------------------------------------
December 1986 152.32 June 1990 240.28 December 1993 323.87
-------------------------------------------------------------------------------------
March 1987 179.56 September 1990 215.93 March 1994 313.24
-------------------------------------------------------------------------------------
June 1987 184.52 December 1990 233.61 June 1994 311.15
-------------------------------------------------------------------------------------
September 1987 193.77 March 1991 261.74 September 1994 317.75
-------------------------------------------------------------------------------------
December 1987 158.70 June 1991 258.45 December 1994 316.77
-------------------------------------------------------------------------------------
March 1988 168.39 September 1991 268.21
-------------------------------------------------------------------------------------
June 1988 176.03 December 1991 291.58
-------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
46
<PAGE>
TABLE 3 - ANNUITY PERIOD
VALUE AT QUARTERLY INTERVALS OF HYPOTHETICAL MONTHLY
VARIABLE ANNUITY PAYMENTS
(Assumes Initial Annuity Payment of $100 beginning on December 31, 1984)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
PAYMENT PAYMENT PAYMENT
MONTH FOR MONTH(/1/) MONTH FOR MONTH(/1/) MONTH FOR MONTH(/1/)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1985 $106.78 September 1988 $155.37 March 1992 $221.84
----------------------------------------------------------------------------------------------
June 1985 114.80 December 1988 156.57 June 1992 221.29
----------------------------------------------------------------------------------------------
September 1985 110.07 March 1989 165.69 September 1992 226.82
----------------------------------------------------------------------------------------------
December 1985 125.27 June 1989 175.55 December 1992 233.32
----------------------------------------------------------------------------------------------
March 1986 139.00 September 1989 188.74 March 1993 235.44
----------------------------------------------------------------------------------------------
June 1986 145.34 December 1989 192.81 June 1993 231.40
----------------------------------------------------------------------------------------------
September 1986 135.64 March 1990 186.84 September 1993 233.97
----------------------------------------------------------------------------------------------
December 1986 142.20 June 1990 198.86 December 1993 237.64
----------------------------------------------------------------------------------------------
March 1987 166.19 September 1990 177.18 March 1994 227.87
----------------------------------------------------------------------------------------------
June 1987 169.31 December 1990 190.04 June 1994 224.41
----------------------------------------------------------------------------------------------
September 1987 176.28 March 1991 211.10 September 1994 227.21
----------------------------------------------------------------------------------------------
December 1987 143.14 June 1991 206.66 December 1994 224.56
----------------------------------------------------------------------------------------------
March 1988 150.58 September 1991 212.63
----------------------------------------------------------------------------------------------
June 1988 156.06 December 1991 229.18
----------------------------------------------------------------------------------------------
</TABLE>
AETNA INCOME SHARES
HYPOTHETICAL PERIODIC ACCUMULATION VALUES AND ANNUITY PAYMENTS
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1984
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/2/) SALES CHARGE VALUE(/3/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1985 $ 1,200.00 $ 20.00 $ 1,326.68 $ 66.33 $ 1,260.35
----------------------------------------------------------------------------
December 1986 2,400.00 40.00 2,743.51 137.18 2,606.33
----------------------------------------------------------------------------
December 1987 3,600.00 60.00 4,048.59 202.43 3,846.16
----------------------------------------------------------------------------
December 1988 4,800.00 80.00 5,503.95 275.20 5,228.75
----------------------------------------------------------------------------
December 1989 6,000.00 100.00 7,488.22 299.53 7,188.69
----------------------------------------------------------------------------
December 1990 7,200.00 120.00 9,323.14 372.93 8,950.21
----------------------------------------------------------------------------
December 1991 8,400.00 140.00 12,312.73 369.38 11,943.35
----------------------------------------------------------------------------
December 1992 9,600.00 160.00 14,294.58 428.84 13,865.74
----------------------------------------------------------------------------
December 1993 10,800.00 180.00 16,705.89 334.12 16,371.77
----------------------------------------------------------------------------
December 1994 12,000.00 200.00 17,034.89 0.00 17,034.89
----------------------------------------------------------------------------
</TABLE>
(/1/) The amounts above assume deductions of all fees and expenses of the Funds
and under the Contracts during the Annuity Period. The Payments are based
on the standard assumed net investment rate of 3 1/2% per annum. See the
narrative preceding these Tables.
(/2/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/3/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
47
<PAGE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1984
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1985 $101.98 September 1988 $150.13 March 1992 $212.59
-------------------------------------------------------------------------------------
June 1985 110.57 December 1988 149.16 June 1992 219.50
-------------------------------------------------------------------------------------
September 1985 112.83 March 1989 151.53 September 1992 226.46
-------------------------------------------------------------------------------------
December 1985 120.75 June 1989 161.56 December 1992 227.69
-------------------------------------------------------------------------------------
March 1986 128.07 September 1989 164.21 March 1993 234.12
-------------------------------------------------------------------------------------
June 1986 129.28 December 1989 168.81 June 1993 239.72
-------------------------------------------------------------------------------------
September 1986 131.86 March 1990 167.74 September 1993 245.09
-------------------------------------------------------------------------------------
December 1986 135.95 June 1990 173.10 December 1993 246.62
-------------------------------------------------------------------------------------
March 1987 138.44 September 1990 174.39 March 1994 237.69
-------------------------------------------------------------------------------------
June 1987 135.48 December 1990 181.93 June 1994 232.55
-------------------------------------------------------------------------------------
September 1987 133.97 March 1991 187.56 September 1994 234.67
-------------------------------------------------------------------------------------
December 1987 140.34 June 1991 191.12 December 1994 234.31
-------------------------------------------------------------------------------------
March 1988 145.12 September 1991 202.49
-------------------------------------------------------------------------------------
June 1988 147.55 December 1991 214.57
-------------------------------------------------------------------------------------
</TABLE>
TABLE 3 - ANNUITY PERIOD
VALUE AT QUARTERLY INTERVALS OF HYPOTHETICAL MONTHLY
VARIABLE ANNUITY PAYMENTS
(Assumes Initial Annuity Payment of $100 beginning on December 31, 1984)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
PAYMENT PAYMENT PAYMENT
MONTH FOR MONTH(/2/) MONTH FOR MONTH(/2/) MONTH FOR MONTH(/2/)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1985 $101.10 September 1988 $131.96 March 1992 $165.66
--------------------------------------------------------------------------------------------
June 1985 108.68 December 1988 129.99 June 1992 169.58
--------------------------------------------------------------------------------------------
September 1985 109.95 March 1989 130.92 September 1992 173.46
---------------------------------------------------------------------------------------
December 1985 116.67 June 1989 138.39 December 1992 172.91
---------------------------------------------------------------------------------------
March 1986 122.68 September 1989 139.45 March 1993 176.28
---------------------------------------------------------------------------------------
June 1986 122.77 December 1989 142.14 June 1993 178.94
---------------------------------------------------------------------------------------
September 1986 124.16 March 1990 140.02 September 1993 181.39
---------------------------------------------------------------------------------------
December 1986 126.91 June 1990 143.26 December 1993 180.95
---------------------------------------------------------------------------------------
March 1987 128.13 September 1990 143.09 March 1994 172.91
---------------------------------------------------------------------------------------
June 1987 124.32 December 1990 148.00 June 1994 167.72
---------------------------------------------------------------------------------------
September 1987 121.87 March 1991 151.28 September 1994 167.80
---------------------------------------------------------------------------------------
December 1987 126.58 June 1991 152.82 December 1994 166.11
---------------------------------------------------------------------------------------
March 1988 129.77 September 1991 160.53
---------------------------------------------------------------------------------------
June 1988 130.81 December 1991 168.65
---------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The amounts above assume deductions of all fees and expenses of the Funds
and under the Contracts during the Annuity Period. The Payments are based
on the standard assumed net investment rate of 3 1/2% per annum. See the
narrative preceding these Tables.
48
<PAGE>
AETNA VARIABLE ENCORE FUND
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1984
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1985 $ 1,200.00 $ 20.00 $ 1,225.45 $ 61.27 $ 1,164.18
----------------------------------------------------------------------------
December 1986 2,400.00 40.00 2,507.18 125.36 2,381.82
----------------------------------------------------------------------------
December 1987 3,600.00 60.00 3,861.61 193.08 3,668.53
----------------------------------------------------------------------------
December 1988 4,800.00 80.00 5,320.58 266.03 5,054.55
----------------------------------------------------------------------------
December 1989 6,000.00 100.00 6,977.91 279.12 6,698.79
----------------------------------------------------------------------------
December 1990 7,200.00 120.00 8,697.51 347.90 8,349.61
----------------------------------------------------------------------------
December 1991 8,400.00 140.00 10,362.80 310.88 10,051.92
----------------------------------------------------------------------------
December 1992 9,600.00 160.00 11,804.21 354.13 11,450.08
----------------------------------------------------------------------------
December 1993 10,800.00 180.00 13,222.53 264.45 12,958.08
----------------------------------------------------------------------------
December 1994 12,000.00 200.00 14,793.90 0.00 14,793.90
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1984
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1985 $101.71 September 1988 $124.54 March 1992 $155.16
-------------------------------------------------------------------------------------
June 1985 103.59 December 1988 126.62 June 1992 156.20
-------------------------------------------------------------------------------------
September 1985 105.29 March 1989 129.10 September 1992 157.11
-------------------------------------------------------------------------------------
December 1985 107.12 June 1989 131.82 December 1992 157.77
-------------------------------------------------------------------------------------
March 1986 108.88 September 1989 134.34 March 1993 158.56
-------------------------------------------------------------------------------------
June 1986 110.34 December 1989 136.78 June 1993 159.30
-------------------------------------------------------------------------------------
September 1986 111.79 March 1990 139.10 September 1993 160.10
-------------------------------------------------------------------------------------
December 1986 113.08 June 1990 141.55 December 1993 160.79
-------------------------------------------------------------------------------------
March 1987 114.44 September 1990 143.96 March 1994 161.48
-------------------------------------------------------------------------------------
June 1987 115.90 December 1990 146.46 June 1994 162.48
-------------------------------------------------------------------------------------
September 1987 117.45 March 1991 148.53 September 1994 163.73
-------------------------------------------------------------------------------------
December 1987 119.27 June 1991 150.40 December 1994 165.30
-------------------------------------------------------------------------------------
March 1988 121.00 September 1991 152.32
-------------------------------------------------------------------------------------
June 1998 122.63 December 1991 154.09
-------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
49
<PAGE>
AETNA INVESTMENT ADVISERS FUND, INC.
HYPOTHETICAL PERIODIC ACCUMULATION VALUES AND ANNUITY PAYMENTS
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1989
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1990 $1,200.00 $ 20.00 $1,222.33 $ 61.12 $1,161.21
----------------------------------------------------------------------------
December 1991 2,400.00 40.00 2,722.45 136.12 2,586.33
----------------------------------------------------------------------------
December 1992 3,600.00 60.00 4,080.52 204.03 3,876.49
----------------------------------------------------------------------------
December 1993 4,800.00 80.00 5,669.78 283.49 5,386.29
----------------------------------------------------------------------------
December 1994 6,000.00 100.00 6,755.19 270.21 6,484.98
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1989
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1990 $100.50 December 1991 $122.03 September 1993 $135.87
-------------------------------------------------------------------------------------
June 1990 104.24 March 1992 121.57 December 1993 139.11
-------------------------------------------------------------------------------------
September 1990 98.48 June 1992 124.32 March 1994 135.05
-------------------------------------------------------------------------------------
December 1990 104.40 September 1992 126.08 June 1994 133.48
-------------------------------------------------------------------------------------
March 1991 110.45 December 1992 128.19 September 1994 137.27
-------------------------------------------------------------------------------------
June 1991 110.48 March 1993 131.17 December 1994 136.90
-------------------------------------------------------------------------------------
September 1991 115.28 June 1993 132.20
-------------------------------------------------------------------------------------
</TABLE>
TABLE 3 - ANNUITY PERIOD
VALUE AT QUARTERLY INTERVALS OF HYPOTHETICAL MONTHLY
VARIABLE ANNUITY PAYMENTS
(Assumes Initial Annuity Payment of $100 beginning on December 31, 1990)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
PAYMENT PAYMENT PAYMENT
MONTH FOR MONTH(/3/) MONTH FOR MONTH(/3/) MONTH FOR MONTH(/3/)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1991 $104.89 September 1992 $113.71 March 1994 $115.67
----------------------------------------------------------------------------------------------
June 1991 104.02 December 1992 114.62 June 1994 113.35
----------------------------------------------------------------------------------------------
September 1991 107.61 March 1993 116.28 September 1994 115.57
----------------------------------------------------------------------------------------------
December 1991 112.93 June 1993 116.19 December 1994 114.27
----------------------------------------------------------------------------------------------
March 1992 111.54 September 1993 118.39
----------------------------------------------------------------------------------------------
June 1992 113.10 December 1993 120.18
----------------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
(/3/) The amounts above assume deductions of all fees and expenses of the Funds
and under the Contracts during the Annuity Period. The Payments are based
on the standard assumed net investment rate of 3 1/2% per annum. See the
narrative preceding these Tables.
50
<PAGE>
ALGER AMERICAN GROWTH PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1989
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1990 $1,200.00 $ 20.00 $1,247.30 $ 62.37 $1,184.93
----------------------------------------------------------------------------
December 1991 2,400.00 40.00 3,125.11 156.26 2,968.85
----------------------------------------------------------------------------
December 1992 3,600.00 60.00 4,804.70 240.24 4,564.46
----------------------------------------------------------------------------
December 1993 4,800.00 80.00 7,166.41 358.32 6,808.09
----------------------------------------------------------------------------
December 1994 6,000.00 100.00 8,388.83 335.55 8,053.28
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1989
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1990 $ 94.31 December 1991 $142.59 September 1993 $181.33
-------------------------------------------------------------------------------------
June 1990 109.69 March 1992 138.75 December 1993 191.39
-------------------------------------------------------------------------------------
September 1990 91.62 June 1992 130.58 March 1994 182.84
-------------------------------------------------------------------------------------
December 1990 102.84 September 1992 138.99 June 1994 172.52
-------------------------------------------------------------------------------------
March 1991 122.22 December 1992 158.25 September 1994 186.62
-------------------------------------------------------------------------------------
June 1991 116.94 March 1993 161.04 December 1994 191.75
-------------------------------------------------------------------------------------
September 1991 131.83 June 1993 165.51
-------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
51
<PAGE>
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1988
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1989 $1,200.00 $ 20.00 $ 1,436.08 $ 71.80 $1,364.28
----------------------------------------------------------------------------
December 1990 2,400.00 40.00 2,808.86 140.44 2,668.42
----------------------------------------------------------------------------
December 1991 3,600.00 60.00 5,885.79 294.29 5,591.50
----------------------------------------------------------------------------
December 1992 4,800.00 80.00 7,372.18 368.61 7,003.57
----------------------------------------------------------------------------
December 1993 6,000.00 100.00 9,488.61 379.54 9,109.07
----------------------------------------------------------------------------
December 1994 7,200.00 120.00 10,200.73 408.03 9,792.70
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1988
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1989 $121.70 March 1991 $218.56 March 1993 $253.23
-------------------------------------------------------------------------------------
June 1989 135.80 June 1991 205.53 June 1993 270.26
-------------------------------------------------------------------------------------
September 1989 167.68 September 1991 230.08 September 1993 304.19
-------------------------------------------------------------------------------------
December 1989 162.44 December 1991 271.28 December 1993 306.96
-------------------------------------------------------------------------------------
March 1990 164.48 March 1992 244.58 March 1994 279.42
-------------------------------------------------------------------------------------
June 1990 188.05 June 1992 217.20 June 1994 260.35
-------------------------------------------------------------------------------------
September 1990 148.59 September 1992 233.48 September 1994 283.36
-------------------------------------------------------------------------------------
December 1990 174.35 December 1992 277.41 December 1994 290.89
-------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
52
<PAGE>
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1986
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1987 $1,200.00 $ 20.00 $ 1,112.65 $ 55.63 $ 1,057.02
----------------------------------------------------------------------------
December 1988 2,400.00 40.00 2,444.81 122.24 2,322.57
----------------------------------------------------------------------------
December 1989 3,600.00 60.00 4,072.09 203.60 3,868.49
----------------------------------------------------------------------------
December 1990 4,800.00 80.00 5,565.03 278.25 5,286.78
----------------------------------------------------------------------------
December 1991 6,000.00 100.00 7,684.96 307.40 7,377.56
----------------------------------------------------------------------------
December 1992 7,200.00 120.00 9,379.10 375.16 9,003.94
----------------------------------------------------------------------------
December 1993 8,400.00 140.00 11,293.88 338.82 10,955.06
----------------------------------------------------------------------------
December 1994 9,600.00 160.00 11,960.53 358.82 11,601.71
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1986
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1987 $112.57 December 1989 $132.97 September 1992 $167.05
-------------------------------------------------------------------------------------
June 1987 115.51 March 1990 134.18 December 1992 171.86
-------------------------------------------------------------------------------------
September 1987 120.87 June 1990 139.46 March 1993 176.90
-------------------------------------------------------------------------------------
December 1987 104.36 September 1990 133.13 June 1993 177.95
-------------------------------------------------------------------------------------
March 1988 111.30 December 1990 141.34 September 1993 183.93
-------------------------------------------------------------------------------------
June 1988 114.04 March 1991 148.25 December 1993 184.54
-------------------------------------------------------------------------------------
September 1988 114.50 June 1991 148.45 March 1994 178.00
-------------------------------------------------------------------------------------
December 1988 115.06 September 1991 153.35 June 1994 174.81
-------------------------------------------------------------------------------------
March 1989 118.57 December 1991 162.47 September 1994 178.19
-------------------------------------------------------------------------------------
June 1989 127.85 March 1992 158.05 December 1994 176.48
-------------------------------------------------------------------------------------
September 1989 134.65 June 1992 159.75
-------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
53
<PAGE>
FIDELITY EQUITY-INCOME PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1986
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1987 $1,200.00 $ 20.00 $ 1,035.65 $ 51.78 $ 983.87
----------------------------------------------------------------------------
December 1988 2,400.00 40.00 2,510.38 125.52 2,384.86
----------------------------------------------------------------------------
December 1989 3,600.00 60.00 4,124.96 206.25 3,918.71
----------------------------------------------------------------------------
December 1990 4,800.00 80.00 4,556.68 227.83 4,328.85
----------------------------------------------------------------------------
December 1991 6,000.00 100.00 7,233.86 289.35 6,944.51
----------------------------------------------------------------------------
December 1992 7,200.00 120.00 9,638.85 385.55 9,253.30
----------------------------------------------------------------------------
December 1993 8,400.00 140.00 12,520.67 375.62 12,145.05
----------------------------------------------------------------------------
December 1994 9,600.00 160.00 14,448.23 433.45 14,014.78
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1986
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1987 $116.62 December 1989 $137.18 September 1992 $160.07
-------------------------------------------------------------------------------------
June 1987 116.44 March 1990 128.48 December 1992 171.94
-------------------------------------------------------------------------------------
September 1987 121.21 June 1990 130.51 March 1993 185.89
-------------------------------------------------------------------------------------
December 1987 97.65 September 1990 107.71 June 1993 190.09
-------------------------------------------------------------------------------------
March 1988 107.54 December 1990 114.75 September 1993 198.67
-------------------------------------------------------------------------------------
June 1988 116.73 March 1991 131.50 December 1993 200.88
-------------------------------------------------------------------------------------
September 1988 117.55 June 1991 133.25 March 1994 195.17
-------------------------------------------------------------------------------------
December 1988 118.35 September 1991 142.34 June 1994 201.93
-------------------------------------------------------------------------------------
March 1989 127.35 December 1991 148.95 September 1994 215.14
-------------------------------------------------------------------------------------
June 1989 135.87 March 1992 153.48 December 1994 212.40
-------------------------------------------------------------------------------------
September 1989 144.01 June 1992 157.65
-------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
54
<PAGE>
FIDELITY GROWTH PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1986
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1987 $1,200.00 $ 20.00 $ 1,060.37 $ 53.02 $ 1,007.35
----------------------------------------------------------------------------
December 1988 2,400.00 40.00 2,435.72 121.79 2,313.93
----------------------------------------------------------------------------
December 1989 3,600.00 60.00 4,488.71 224.44 4,264.27
----------------------------------------------------------------------------
December 1990 4,800.00 80.00 5,022.28 251.11 4,771.17
----------------------------------------------------------------------------
December 1991 6,000.00 100.00 8,645.08 345.80 8,299.28
----------------------------------------------------------------------------
December 1992 7,200.00 120.00 10,621.44 424.86 10,196.58
----------------------------------------------------------------------------
December 1993 8,400.00 140.00 13,805.85 414.18 13,391.67
----------------------------------------------------------------------------
December 1994 9,600.00 160.00 14,835.69 445.07 14,390.62
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1986
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1987 $117.68 December 1989 $151.80 September 1992 $180.29
-------------------------------------------------------------------------------------
June 1987 121.59 March 1990 145.68 December 1992 205.27
-------------------------------------------------------------------------------------
September 1987 128.33 June 1990 156.68 March 1993 212.52
-------------------------------------------------------------------------------------
December 1987 102.38 September 1990 123.70 June 1993 227.57
-------------------------------------------------------------------------------------
March 1988 111.73 December 1990 132.33 September 1993 242.00
-------------------------------------------------------------------------------------
June 1988 117.41 March 1991 155.77 December 1993 241.96
-------------------------------------------------------------------------------------
September 1988 116.84 June 1991 150.85 March 1994 233.61
-------------------------------------------------------------------------------------
December 1988 116.87 September 1991 173.36 June 1994 217.27
-------------------------------------------------------------------------------------
March 1989 125.98 December 1991 190.18 September 1994 233.94
-------------------------------------------------------------------------------------
June 1989 135.15 March 1992 192.77 December 1994 238.96
-------------------------------------------------------------------------------------
September 1989 150.59 June 1992 175.96
-------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
55
<PAGE>
FIDELITY OVERSEAS PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1987
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1988 $1,200.00 $ 20.00 $ 1,245.57 $ 62.28 $ 1,183.29
----------------------------------------------------------------------------
December 1989 2,400.00 40.00 2,923.51 146.18 2,777.33
----------------------------------------------------------------------------
December 1990 3,600.00 60.00 3,970.38 198.52 3,771.86
----------------------------------------------------------------------------
December 1991 4,800.00 80.00 5,463.60 273.18 5,190.42
----------------------------------------------------------------------------
December 1992 6,000.00 100.00 5,884.11 235.36 5,648.75
----------------------------------------------------------------------------
December 1993 7,200.00 120.00 9,349.71 373.99 8,975.72
----------------------------------------------------------------------------
December 1994 8,400.00 140.00 10,536.93 316.11 10,220.82
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1987
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1988 $103.32 September 1990 $123.39 March 1993 $136.03
-------------------------------------------------------------------------------------
June 1998 100.97 December 1990 129.35 June 1993 144.09
-------------------------------------------------------------------------------------
September 1998 100.55 March 1991 130.66 September 1993 156.48
-------------------------------------------------------------------------------------
December 1998 106.79 June 1991 126.13 December 1993 165.04
-------------------------------------------------------------------------------------
March 1989 111.42 September 1991 137.78 March 1994 167.91
-------------------------------------------------------------------------------------
June 1989 109.71 December 1991 137.99 June 1994 168.99
-------------------------------------------------------------------------------------
September 1989 126.12 March 1992 133.57 September 1994 170.38
-------------------------------------------------------------------------------------
December 1989 133.19 June 1992 144.83 December 1994 165.82
-------------------------------------------------------------------------------------
March 1990 132.79 September 1992 128.61
-------------------------------------------------------------------------------------
June 1990 144.96 December 1992 121.66
-------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
56
<PAGE>
FRANKLIN GOVERNMENT SECURITIES TRUST
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1989
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1990 $1,200.00 $ 20.00 $1,259.04 $ 62.95 $1,196.09
----------------------------------------------------------------------------
December 1991 2,400.00 40.00 2,728.65 136.43 2,592.22
----------------------------------------------------------------------------
December 1992 3,600.00 60.00 4,122.37 206.12 3,916.25
----------------------------------------------------------------------------
December 1993 4,800.00 80.00 5,588.18 279.41 5,308.77
----------------------------------------------------------------------------
December 1994 6,000.00 100.00 6,477.09 259.08 6,218.01
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1989
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1990 $ 99.93 December 1991 $124.93 September 1993 $140.60
-------------------------------------------------------------------------------------
June 1990 103.18 March 1992 123.11 December 1993 140.85
-------------------------------------------------------------------------------------
September 1990 104.50 June 1992 128.13 March 1994 135.19
-------------------------------------------------------------------------------------
December 1990 109.10 September 1992 132.33 June 1994 133.20
-------------------------------------------------------------------------------------
March 1991 111.86 December 1992 132.46 September 1994 133.45
-------------------------------------------------------------------------------------
June 1991 113.83 March 1993 136.50 December 1994 133.92
-------------------------------------------------------------------------------------
September 1991 119.43 June 1993 139.47
-------------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
57
<PAGE>
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1994 $1,200.00 $20.00 $1,346.33 $67.32 $1,279.01
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
----------------------------------------------------------------------------------
<S> <C> <C> <C>
March 1994 $95.38 September 1994 $109.21
----------------------------------------------------------------------------------
June 1994 93.78 December 1994 114.91
----------------------------------------------------------------------------------
</TABLE>
JANUS ASPEN BALANCED PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1994 $1,200.00 $20.00 $1,155.86 $57.79 $1,098.07
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
----------------------------------------------------------------------------------
<S> <C> <C> <C>
March 1994 $101.75 September 1994 $100.92
----------------------------------------------------------------------------------
June 1994 100.50 December 1994 99.58
----------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
58
<PAGE>
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1994 $1,200.00 $20.00 $1,161.25 $58.06 $1,103.19
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
----------------------------------------------------------------------------------
<S> <C> <C> <C>
March 1994 $99.40 September 1994 $98.99
----------------------------------------------------------------------------------
June 1994 98.60 December 1994 97.88
----------------------------------------------------------------------------------
</TABLE>
JANUS ASPEN GROWTH PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1994 $1,200.00 $20.00 $1,176.15 $58.81 $1,117.34
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
----------------------------------------------------------------------------------
<S> <C> <C> <C>
March 1994 $100.85 September 1994 $101.74
----------------------------------------------------------------------------------
June 1994 99.05 December 1994 101.62
----------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
59
<PAGE>
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1994 $1,200.00 $20.00 $1,183.58 $59.18 $1,124.40
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
----------------------------------------------------------------------------------
<S> <C> <C> <C>
March 1994 $99.19 September 1994 $99.39
----------------------------------------------------------------------------------
June 1994 98.49 December 1994 99.67
----------------------------------------------------------------------------------
</TABLE>
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1994 $1,200.00 $20.00 $1,166.66 $58.33 $1,108.33
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1993
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
----------------------------------------------------------------------------------
<S> <C> <C> <C>
March 1994 $99.69 September 1994 $101.58
----------------------------------------------------------------------------------
June 1994 97.48 December 1994 100.26
----------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
60
<PAGE>
LEXINGTON NATURAL RESOURCES TRUST
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1989
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1990 $1,200.00 $ 20.00 $1,079.80 $ 53.99 $1,025.81
----------------------------------------------------------------------------
December 1991 2,400.00 40.00 2,202.09 110.10 2,091.99
----------------------------------------------------------------------------
December 1992 3,600.00 60.00 5,408.91 270.45 5,138.46
----------------------------------------------------------------------------
December 1993 4,800.00 80.00 7,166.49 358.32 6,808.17
----------------------------------------------------------------------------
December 1994 6,000.00 100.00 7,806.83 312.27 7,494.56
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1989
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1990 $94.55 December 1991 $ 78.82 September 1993 $150.57
-------------------------------------------------------------------------------------
June 1990 85.87 March 1992 78.05 December 1993 144.38
-------------------------------------------------------------------------------------
September 1990 94.91 June 1992 77.73 March 1994 140.65
-------------------------------------------------------------------------------------
December 1990 83.98 September 1992 129.97 June 1994 137.08
-------------------------------------------------------------------------------------
March 1991 77.84 December 1992 130.51 September 1994 145.53
-------------------------------------------------------------------------------------
June 1991 81.45 March 1993 144.40 December 1994 134.79
-------------------------------------------------------------------------------------
September 1991 76.72 June 1993 148.57
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
61
<PAGE>
NEUBERGER & BERMAN GROWTH PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1985
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1986 $ 1,200.00 $ 20.00 $ 1,182.44 $ 59.12 $ 1,123.32
----------------------------------------------------------------------------
December 1987 2,400.00 40.00 2,089.17 104.46 1,984.71
----------------------------------------------------------------------------
December 1988 3,600.00 60.00 3,887.42 194.37 3,693.05
----------------------------------------------------------------------------
December 1989 4,800.00 80.00 6,333.08 316.65 6,016.43
----------------------------------------------------------------------------
December 1990 6,000.00 100.00 6,895.07 275.80 6,619.27
----------------------------------------------------------------------------
December 1991 7,200.00 120.00 10,155.85 406.23 9,749.62
----------------------------------------------------------------------------
December 1992 8,400.00 140.00 12,260.19 367.81 11,892.38
----------------------------------------------------------------------------
December 1993 9,600.00 160.00 14,501.96 435.06 14,066.90
----------------------------------------------------------------------------
December 1994 10,800.00 180.00 14,760.91 295.22 14,465.69
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1985
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1986 $117.52 March 1989 $144.66 March 1992 $196.43
-------------------------------------------------------------------------------------
June 1986 120.84 June 1989 159.49 June 1992 192.09
-------------------------------------------------------------------------------------
September 1986 109.37 September 1989 178.13 September 1992 198.75
-------------------------------------------------------------------------------------
December 1986 113.51 December 1989 171.94 December 1992 215.87
-------------------------------------------------------------------------------------
March 1987 135.03 March 1990 163.27 March 1993 216.00
-------------------------------------------------------------------------------------
June 1987 138.75 June 1990 173.51 June 1993 221.41
-------------------------------------------------------------------------------------
September 1987 143.88 September 1990 145.25 September 1993 236.27
-------------------------------------------------------------------------------------
December 1987 106.60 December 1990 155.92 December 1993 233.43
-------------------------------------------------------------------------------------
March 1988 120.81 March 1991 178.87 March 1994 223.60
-------------------------------------------------------------------------------------
June 1988 126.61 June 1991 176.05 June 1994 208.97
-------------------------------------------------------------------------------------
September 1988 127.35 September 1991 185.94 September 1994 223.14
-------------------------------------------------------------------------------------
December 1988 132.61 December 1991 199.68 December 1994 219.10
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
62
<PAGE>
SCUDDER INTERNATIONAL PORTFOLIO
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1987
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1988 $1,200.00 $ 20.00 $ 1,272.70 $ 63.64 $ 1,209.06
----------------------------------------------------------------------------
December 1989 2,400.00 40.00 3,132.67 156.63 2,976.04
----------------------------------------------------------------------------
December 1990 3,600.00 60.00 3,942.42 197.12 3,745.30
----------------------------------------------------------------------------
December 1991 4,800.00 80.00 5,559.92 278.00 5,281.92
----------------------------------------------------------------------------
December 1992 6,000.00 100.00 6,475.22 259.01 6,216.21
----------------------------------------------------------------------------
December 1993 7,200.00 120.00 10,167.85 406.71 9,761.14
----------------------------------------------------------------------------
December 1994 8,400.00 140.00 11,092.72 332.78 10,759.94
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1987
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1988 $108.22 September 1990 $137.61 March 1993 $164.56
-------------------------------------------------------------------------------------
June 1988 110.15 December 1990 143.07 June 1993 171.18
-------------------------------------------------------------------------------------
September 1988 104.91 March 1991 154.45 September 1993 189.68
-------------------------------------------------------------------------------------
December 1988 115.28 June 1991 148.17 December 1993 204.23
-------------------------------------------------------------------------------------
March 1989 125.78 September 1991 156.84 March 1994 202.46
-------------------------------------------------------------------------------------
June 1989 130.06 December 1991 157.46 June 1994 204.44
-------------------------------------------------------------------------------------
September 1989 147.69 March 1992 150.63 September 1994 208.68
-------------------------------------------------------------------------------------
December 1989 156.87 June 1992 159.33 December 1994 199.98
-------------------------------------------------------------------------------------
March 1990 158.34 September 1992 156.39
-------------------------------------------------------------------------------------
June 1990 166.92 December 1992 150.97
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
63
<PAGE>
TCI GROWTH
HYPOTHETICAL PERIODIC ACCUMULATION VALUES
TABLE 1 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT ANNUAL INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1987
(Assuming $100 Monthly Purchase Payments made during each Contract Year)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
VALUE AT END PURCHASE MAINTENANCE ACCUMULATION DEFERRED WITHDRAWAL
OF MONTH PAYMENTS FEES VALUE(/1/) SALES CHARGE VALUE(/2/)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 1988 $1,200.00 $ 20.00 $ 1,201.10 $ 60.06 $ 1,141.04
----------------------------------------------------------------------------
December 1989 2,400.00 40.00 2,814.55 140.73 2,673.82
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December 1990 3,600.00 60.00 3,913.50 195.68 3,717.82
----------------------------------------------------------------------------
December 1991 4,800.00 80.00 6,876.43 343.82 6,532.61
----------------------------------------------------------------------------
December 1992 6,000.00 100.00 7,942.07 317.68 7,624.39
----------------------------------------------------------------------------
December 1993 7,200.00 120.00 10,226.22 409.05 9,817.17
----------------------------------------------------------------------------
December 1994 8,400.00 140.00 11,154.78 334.64 10,820.14
----------------------------------------------------------------------------
</TABLE>
TABLE 2 - ACCUMULATION PERIOD
HYPOTHETICAL ACCUMULATION VALUES AT QUARTERLY INTERVALS
FOLLOWING CONTRACT ISSUANCE ON DECEMBER 31, 1987
(Assumes Single $100 Net Purchase Payment made at Contract Issuance)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION VALUE AT END ACCUMULATION
OF MONTH VALUE(/1/) OF MONTH VALUE(/1/) OF MONTH VALUE(/1/)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 1988 $ 91.40 September 1990 $113.00 March 1993 $166.85
-----------------------------------------------------------------------------------
June 1988 100.13 December 1990 119.63 June 1993 175.10
-----------------------------------------------------------------------------------
September 1988 94.39 March 1991 145.88 September 1993 184.11
-----------------------------------------------------------------------------------
December 1988 96.51 June 1991 136.27 December 1993 184.72
-----------------------------------------------------------------------------------
March 1989 104.63 September 1991 151.98 March 1994 180.04
-----------------------------------------------------------------------------------
June 1989 110.48 December 1991 167.60 June 1994 170.61
-----------------------------------------------------------------------------------
September 1989 124.71 March 1992 159.19 September 1994 178.52
-----------------------------------------------------------------------------------
December 1989 122.65 June 1992 148.65 December 1994 180.31
-----------------------------------------------------------------------------------
March 1990 123.51 September 1992 152.80
-----------------------------------------------------------------------------------
June 1990 134.26 December 1992 163.65
-----------------------------------------------------------------------------------
</TABLE>
(/1/) The Accumulation Value is net of all applicable fees and expenses of the
Fund and under the Contract, except the deferred sales charges. See the
narrative preceding these Tables.
(/2/) The Withdrawal Value is net of all applicable fees and expenses of the
Fund and under the Contract, including deferred sales charges. See the
narrative preceding these Tables.
64
<PAGE>
For Master Applications Only
I hereby acknowledge receipt of:
(1) an Account C 403(b) group prospectus dated May 1, 1995, for tax-deferred
annuity contracts issued by Aetna Life Insurance and Annuity Company; and
(2) all current prospectuses pertaining to all of the variable investment
options under the contracts.
[_] Please send an Account C Statement of Additional Information.
-------------------------------------------------------------------------------
SIGNATURE
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DATE
75964-1 (5/95)
