<PAGE>
As filed with the Securities and Exchange Registration No. 33-75986*
Commission on April 12, 1996 Registration No. 811-2513
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
Post-Effective Amendment No. 5 To
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment To
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
---------------------------------------------------------------
Variable Annuity Account C of Aetna Life Insurance and Annuity Company
(EXACT NAME OF REGISTRANT)
Aetna Life Insurance and Annuity Company
(NAME OF DEPOSITOR)
151 Farmington Avenue, RE4C, Hartford, Connecticut 06156
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Depositor's Telephone Number, including Area Code: (860) 273-7834
Susan E. Bryant, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4C, Hartford, Connecticut 06156
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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It is proposed that this filing will become effective:
X on May 1, 1996 pursuant to paragraph (a)(3) of Rule 485
--- (Request for acceleration has been made.)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
Registrant expects to file a Rule 24f-2 Notice for the fiscal year ended
December 31, 1995 on or before February 29, 1996.
*Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which includes
all the information which would currently be required in prospectuses relating
to the securities covered by the following earlier Registration Statements:
33-75970; 33-75954; and 33-75956.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
- -------- ------------------- --------
<C> <S> <C>
1 Cover Page. . . . . . . . . . . . . . . . . Cover Page
2 Definitions . . . . . . . . . . . . . . . . Definitions
3 Synopsis or Highlights. . . . . . . . . . . Prospectus Summary; Fee Table
4 Condensed Financial Information . . . . . . Condensed Financial Information
5 General Description of Registrant,
Depositor, and Portfolio Companies. . . . . The Company; Variable Annuity
Account C; The Funds
6 Deductions and Expenses . . . . . . . . . . Charges and Deductions;
Distribution
7 General Description of Variable
Annuity Contracts . . . . . . . . . . . . . Purchase; Miscellaneous
8 Annuity Period. . . . . . . . . . . . . . . Annuity Period
9 Death Benefit . . . . . . . . . . . . . . . Death Benefit During Accumulation
Period; Death Benefit Payable
During the Annuity Period
10 Purchases and Contract Value. . . . . . . . Purchase; Contract Valuation
11 Redemptions . . . . . . . . . . . . . . . . Right to Cancel; Withdrawals
12 Taxes . . . . . . . . . . . . . . . . . . . Tax Status
13 Legal Proceedings . . . . . . . . . . . . . Miscellaneous - Legal Matters and
Proceedings
14 Table of Contents of the Statement of
Additional Information. . . . . . . . . . . Contents of the Statement of
Additional Information
<PAGE>
<CAPTION>
FORM N-4
ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
- -------- -------------------------------------------- --------
<C> <S> <C>
15 Cover Page. . . . . . . . . . . . . . . . . Cover page
16 Table of Contents . . . . . . . . . . . . . Table of Contents
17 General Information and History . . . . . . General Information and History
18 Services. . . . . . . . . . . . . . . . . . General Information and History;
Independent Auditors
19 Purchase of Securities Being Offered. . . . Offering and Purchase of Contracts
20 Underwriters. . . . . . . . . . . . . . . . Offering and Purchase of Contracts
21 Calculation of Performance Data . . . . . . Performance Data; Average Annual Total
Return Quotations
22 Annuity Payments. . . . . . . . . . . . . . Annuity Payments
23 Financial Statements. . . . . . . . . . . . Financial Statements
</TABLE>
PART C (OTHER INFORMATION)
--------------------------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
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This Prospectus describes group deferred variable annuity contracts
("Contracts") issued by Aetna Life Insurance and Annuity Company (the
"Company"). The Contracts are available for nonprofit healthcare organizations
and certain tax-exempt nonhealthcare (Section 501(c)(3)) organizations for their
employees under Section 403(b) of the Internal Revenue Code of 1986 as amended
(the "Code") and for employees of certain tax-exempt organizations and their
for-profit subsidiaries in connection with qualified defined contribution plans
under Sections 401(a)/401(k) of the Code. (See "Purchase.")
The Contracts provide that contributions may be allocated to one or more of the
Credited Interest Options or to one or more of the Subaccounts of Variable
Annuity Account C, a separate account of the Company. The Subaccounts invest
directly in shares of the following Funds:
- Aetna Variable Fund - Fidelity VIP Overseas Portfolio
- Aetna Income Shares - Franklin Government Securities
- Aetna Variable Encore Fund Trust
- Aetna Investment Advisers Fund, - Janus Aspen Aggressive Growth
Inc. Portfolio
- Aetna Ascent Variable Portfolio - Janus Aspen Balanced Portfolio
- Aetna Crossroads Variable Portfolio - Janus Aspen Flexible Income
- Aetna Legacy Variable Portfolio Portfolio
- Alger American Growth Portfolio - Janus Aspen Growth Portfolio
- Alger American Small Cap Portfolio - Janus Aspen Short-Term Bond
- Calvert Responsibly Invested Portfolio
Balanced Portfolio - Janus Aspen Worldwide Growth
- Fidelity VIP II Contrafund Portfolio
Portfolio - Lexington Natural Resources Trust
- Fidelity VIP Equity-Income - Neuberger & Berman Growth Portfolio
Portfolio - Scudder International Portfolio
- Fidelity VIP Growth Portfolio Class A Shares
- TCI Growth (a Twentieth Century
fund)
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account, the Fixed Account and the Fixed Plus Account.
Except as specifically mentioned, this Prospectus describes only investments
through the Separate Account. A brief description of each of the Credited
Interest Options is contained in Appendices to this Prospectus. Additional
information concerning the Guaranteed Accumulation Account is also contained in
a separate prospectus.
The availability of the Funds and the Credited Interest Options is subject to
applicable regulatory authorization. Not all Funds or Credited Interest Options
may be available in all jurisdictions, under all Contracts or under all Plans.
Please check with your employer to determine option availability. (See
"Investment Options.")
This Prospectus provides investors with the information that they should know
about the Separate Account before investing in the Contract through the Separate
Account. Additional information about the Separate Account is contained in a
Statement of Additional Information ("SAI") which is available at no charge. The
SAI has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Table of Contents for the SAI is printed
on page 18 of this Prospectus. An SAI may be obtained by indicating the request
on the enrollment form or on the prospectus receipt contained in this
Prospectus, or by calling the number listed under the "Inquiries" section of the
Prospectus Summary.
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.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED MAY 1,
1996.
<PAGE>
TABLE OF CONTENTS
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DEFINITIONS........................................................... DEFINITIONS - 1
PROSPECTUS SUMMARY.................................................... SUMMARY - 1
FEE TABLE............................................................. FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION....................................... AUV HISTORY - 1
THE COMPANY........................................................... 1
VARIABLE ANNUITY ACCOUNT C............................................ 1
INVESTMENT OPTIONS.................................................... 1
The Funds......................................................... 1
Credited Interest Options......................................... 4
PURCHASE.............................................................. 4
Contract Availability............................................. 4
Purchasing Interests in the Contract.............................. 4
Purchase Payments................................................. 4
Rights Under the Contract......................................... 5
Transfer Credits.................................................. 5
Right to Cancel................................................... 5
CHARGES AND DEDUCTIONS................................................ 5
Daily Deductions from the Separate Account........................ 5
Mortality and Expense Risk Charge............................ 5
Administrative Expense Charge................................ 6
Maintenance Fee................................................... 6
Deferred Sales Charge............................................. 6
Deferred Sales Charge Schedule for GAA for Certain New York
Contracts........................................................ 8
Fund Expenses..................................................... 8
Premium and Other Taxes........................................... 8
CONTRACT VALUATION.................................................... 8
Account Value..................................................... 8
Accumulation Units................................................ 8
Net Investment Factors............................................ 9
TRANSFERS............................................................. 9
Dollar Cost Averaging Program..................................... 9
WITHDRAWALS........................................................... 9
Reinvestment Privilege............................................ 10
CONTRACT LOANS........................................................ 10
ADDITIONAL WITHDRAWAL OPTIONS......................................... 11
DEATH BENEFIT DURING ACCUMULATION PERIOD.............................. 11
ANNUITY PERIOD........................................................ 12
Annuity Period Elections.......................................... 12
Annuity Options................................................... 12
Annuity Payments.................................................. 13
Charges Deducted During the Annuity Period........................ 13
Death Benefit Payable During the Annuity Period................... 13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
TAX STATUS............................................................ 14
Introduction...................................................... 14
Taxation of the Company........................................... 14
Contracts Used with Certain Retirement Plans...................... 14
MISCELLANEOUS......................................................... 17
Distribution...................................................... 17
Delay or Suspension of Payments................................... 17
Performance Reporting............................................. 17
Voting Rights..................................................... 17
Modification of the Contract...................................... 18
Legal Matters and Proceedings..................................... 18
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION................... 18
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT........................... 19
APPENDIX II--THE FIXED ACCOUNT........................................ 20
APPENDIX III--THE FIXED PLUS ACCOUNT.................................. 21
APPENDIX IV--EMPLOYEE APPOINTMENT OF EMPLOYER AS AGENT UNDER AN
ANNUITY CONTRACT.................................................... 23
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following terms are defined as they are used in this Prospectus:
ACCOUNT: A record which identifies contract values accumulated on behalf of each
Participant during the Accumulation Period. One or more Employee Accounts and
Employer Accounts may be established for each Participant.
ACCOUNT VALUE: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
ACCOUNT YEAR: A period of twelve months measured from the date on which an
Account is established (the 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 each Subaccount before annuity
payments begin.
ANNUITANT: The person on whose life or life expectancy the annuity payments are
based.
ANNUITY: A series of payments for life, a definite period or a combination of
the two.
ANNUITY DATE: The date on which annuity payments begin.
ANNUITY PERIOD: The period during which annuity payments are made.
ANNUITY UNIT: A measure of the value of each Subaccount selected during the
Annuity Period.
CODE: Internal Revenue Code of 1986, as amended.
COMPANY (WE, US): Aetna Life Insurance and Annuity Company.
CONTRACT: The group deferred variable annuity contracts offered by this
Prospectus.
CONTRACT BENEFICIARY(IES): Under the Contract, the Contract Holder is the
Contract Beneficiary. The Participant designates a beneficiary with the
employer, pursuant to terms of the Plan. (See definition of "Plan Beneficiary"
below.)
CONTRACT HOLDER: The person or entity to whom the Contract is issued. The
Contract Holder is usually the employer.
CREDITED INTEREST OPTIONS: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Accumulation
Account, the Fixed Account and the Fixed Plus Account, each of which is
described in an Appendix to this Prospectus. Amounts allocated to the Credited
Interest Options are included in the Account Value.
EMPLOYEE ACCOUNT: An Account that is credited with payments derived from
employee salary reduction contributions and remitted to the Company by the
employer on behalf of each Participant.
EMPLOYER ACCOUNT: An account that is credited with net Purchase Payments made by
the Contract Holder.
FUND(S): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the Contract.
HOME OFFICE: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
PARTICIPANT (YOU): A person participating in a Plan maintained by an eligible
organization.
PLAN BENEFICIARY: The person entitled to receive benefits under the Plan in the
event of the Participant's death.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
PLAN(S): Tax-deferred retirement plans under Section 403(b) of the Code for
employees of nonprofit healthcare organizations and other Section 501(c)(3)
nonhealthcare organizations. Certain for-profit subsidiaries of tax-exempt
organizations may be offered a separate Contract in connection with qualified
defined contribution plans under Section 401(a)/401(k) of the Code.
PURCHASE PAYMENT(S): The gross payment(s) made to the Company under a Contract.
PURCHASE PAYMENT PERIODS: For "Installment Purchase Payment Accounts," 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.
SEPARATE ACCOUNT: Variable Annuity Account C, a separate account established by
the Company for the purpose of funding variable annuity contracts issued by the
Company.
SUBACCOUNT(S): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
VALUATION DATE: The date and time at which the value of the Subaccount is
calculated. Currently, this calculation occurs at the close of business of the
New York Stock Exchange on any normal business day, Monday through Friday, that
the New York Stock Exchange is open.
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DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
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- --------------------------------------------------------------------------------
CONTRACTS OFFERED
The Contracts described in this Prospectus are group deferred variable
annuity contracts issued by Aetna Life Insurance and Annuity Company (the
"Company"). The purpose of the Contract is to accumulate values and to provide
benefits upon retirement. The Contracts are available for nonprofit healthcare
organizations and certain tax-exempt nonhealthcare (Section 501(c)(3))
organizations for their employees under Section 403(b) of the Code, and for
employees of certain for-profit subsidiaries of tax-exempt organizations in
connection with qualified defined contribution plans under Section 401(a)/401(k)
of the Code. Under these Plans, the Contract Holder (employer) makes
contributions on behalf of a Participant (employee) and the Participant makes
contributions via salary reduction.
CONTRACT PURCHASE
The Contract 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 the enrollment form and submitting it to the Company. Purchase
Payments can be applied to the Contract either through a lump-sum transfer from
a pre-existing plan or through periodic salary reductions or employer
contributions. (See "Purchase.")
FREE LOOK PERIOD
Contract Holders have the right to cancel their purchase within 10 days
after receiving the Contract (or longer if required by state law) by returning
it to the Company along with a written notice of cancellation. Unless state law
requires otherwise, the amount received upon cancellation will reflect the
investment performance of the Subaccounts into which Purchase Payments were
deposited. In some cases this may be more or less than the amount of Purchase
Payments. (See "Purchase--Right to Cancel.")
INVESTMENT OPTIONS
The Company has established Variable Annuity Account C, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows investment
in any or all of the Subaccounts, as well as in the Credited Interest Options
described below. For a complete list of the Funds available under the Contracts,
and a description of the investment objectives of each of the Funds and their
investment advisers, see "Investment Options-- The Funds" in this Prospectus, as
well as the prospectuses for each of the Funds.
The Contract also provides for investment in Credited Interest Options which
allow you to earn fixed rates of interest. The fixed options available under the
Contract are the Guaranteed Accumulation Account ("GAA"), the Fixed Account, and
the Fixed Plus Account. (See the Appendices to this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charges and an administrative charge), as well as any annual maintenance fee and
premium and other taxes. The Funds also incur certain fees and expenses which
are deducted directly from the Funds. A deferred sales charge may apply upon a
full or partial withdrawal of the Account Value. (See the Fee Table and "Charges
and Deductions.")
TRANSFERS
Prior to the Annuity Date, and subject to certain limitations, Account
Values may be transferred among the Subaccounts and the Credited Interest
Options without charge. Transfers can be requested in writing or by telephone in
accordance with the Company's transfer procedures. (See Appendices for a full
description of the restrictions applicable to transfers from the Credited
Interest Options.) (See "Transfers.")
WITHDRAWALS
The Contract Holder may redeem all or a part of the Account Value prior to
the Annuity Date by properly completing a disbursement form and sending it to
the Company. Limitations apply to withdrawals from the Fixed Plus Account.
Certain charges may be assessed upon withdrawal. The withdrawal may also be
subject to income tax and a federal tax penalty. The Code restricts full and
partial withdrawals in some circumstances. (See "Withdrawals.")
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
The Contract also offers certain Additional Withdrawal Options during the
Accumulation Period to persons meeting certain criteria. Additional Withdrawal
Options are not available in all states and may not be suitable in every
situation. (See "Additional Withdrawal Options.")
LOANS
A Contract Holder under a Section 403(b) Plan may request a loan on your
behalf at any time during the Accumulation Period. Such loan will be taken from
the Employee Account and/or the Employer Account, as permitted by the Contract
Holder. Loans are not available from Contracts issued under Section
401(a)/401(k) Plans. (See "Contract Loans.")
DEATH BENEFIT
The Contract provides that a death benefit is payable to the Contract
Beneficiary upon the death of the Participant before the Annuity Date. The
Contract Holder may direct that we make such payment to the Plan Beneficiary.
The amount of the death benefit will be equal to the Account Value. Until the
election of a method of payment, the Account Value will remain invested under
the Contract. The Contract Holder, on behalf of a Plan Beneficiary, may elect to
receive the proceeds in a lump sum or under any of the payment options available
under the Contract. However, the Code requires that distributions begin within a
certain time period. (See "Death Benefit During Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable,
depending upon the terms of the Contract and the Annuity Option selected. (See
"Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
On the Annuity Date, the Contract Holder, on your behalf, may elect the
commencement of Annuity Payments. Annuity Payments can be made on either a
fixed, variable or combination fixed and variable basis. If a variable payout is
selected, the payments will vary with the investment performance of the
Subaccount(s) selected. The Company reserves the right to limit the number of
Subaccounts that may be available during the Annuity Period. (See "Annuity
Period.")
TAXES
Contributions and earnings are not generally taxed until you or your
beneficiary(ies) actually receive a distribution from the Contract. A 10%
federal tax penalty and a 20% withholding for income tax may be imposed on
certain withdrawals. (See "Tax Status.")
INQUIRIES
Questions, inquiries or requests for additional information can be directed
to your agent or local representative, or you may contact the Company as
follows:
<TABLE>
<S> <C>
- Write to: Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-1277
Attention: Customer Service
(For AetnaPlus Contracts)
- Call Customer Service: 1-800-525-4225 (for automated transfers or changes
in the allocation of Account Values, call:
1-800-262-3862)
(For Multiple Option Contracts)
- Call Customer Service: 1-800-677-4636 (for automated transfers or changes
in the allocation of Account Values, call:
1-800-262-3862)
</TABLE>
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SUMMARY - 2
<PAGE>
FEE TABLE
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This Fee Table describes the various charges and expenses associated with the
Contract during the Accumulation Period. For amounts deducted during the Annuity
Period, see "Charges Deducted During the Annuity Period." No sales charge is
paid upon purchase of the Contract. Some expenses may vary as explained under
"Charges and Deductions." The charges and expenses shown below do not include
premium taxes that may be applicable. For more information regarding fees and
expenses paid out of the assets of a particular Fund, see the Fund's prospectus.
DIRECT CHARGES. These charges are deducted directly from the Account Value. They
include:
DEFERRED SALES CHARGE. The deferred sales charge is deducted as a
percentage of the amount withdrawn. The total amount deducted for the
deferred sales charge will not exceed 8.5% of the total Purchase Payments
applied to the Account. The amount of the deferred sales charge is
calculated as follows:
<TABLE>
<CAPTION>
INSTALLMENT PURCHASE PAYMENT ACCOUNTS: SINGLE PURCHASE PAYMENT ACCOUNTS:
PURCHASE PAYMENT DEFERRED SALES ACCOUNT YEARS DEFERRED SALES
PERIODS COMPLETED CHARGE DEDUCTION COMPLETED CHARGE DEDUCTION
- ------------------------------ ---------------- ------------------------------ ----------------
<S> <C> <C> <C>
Less than 5 5% Less than 5 5%
5 or more but less than 7 4% 5 or more but less than 6 4%
7 or more but less than 9 3% 6 or more but less than 7 3%
9 or more but less than 10 2% 7 or more but less than 8 2%
More than 10 0% 8 or more but less than 9 1%
9 or more 0%
</TABLE>
<TABLE>
<S> <C>
ANNUAL CONTRACT MAINTENANCE FEE Installment Purchase Payment Account...................... $ 15.00
Single Purchase Payment Account........................... $ 0.00
The maintenance fee will generally be deducted annually from each Account
during the Accumulation Period. The amount shown is the MAXIMUM maintenance fee
that can be deducted under each Account.
</TABLE>
INDIRECT CHARGES. Each Subaccount pays these expenses out of its assets. The
charges are reflected in the Subaccount's daily Accumulation Unit Value and are
not charged directly to an Account. They include:
<TABLE>
<S> <C>
MORTALITY AND EXPENSE RISK CHARGE.......................................................... 1.25%
ADMINISTRATIVE EXPENSE CHARGE. We currently do not impose an Administrative Expense
Charge..................................................................................... 0.00%
-----
However, we reserve the right to deduct a daily charge of not more than 0.25%
per year from the Subaccounts.
TOTAL SEPARATE ACCOUNT CHARGES........................................................... 1.25%
---------
---------
</TABLE>
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FEE TABLE - 1
<PAGE>
ANNUAL EXPENSES OF THE FUNDS
The following table illustrates the advisory fees and other expenses applicable
to the Funds. 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, 1995. A Fund's "Other Expenses" include operating costs
of the Fund. The expenses shown below are reflected in the Fund's net asset
value and are not deducted from the Account Value under the Contract.
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FEES(1) OTHER EXPENSES TOTAL FUND
(AFTER EXPENSE (AFTER EXPENSE ANNUAL
REIMBURSEMENT) REIMBURSEMENT) EXPENSES
-------------- -------------- -----------
<S> <C> <C> <C>
Aetna Variable Fund(2) 0.25% 0.06% 0.31%
Aetna Income Shares(2) 0.25% 0.08% 0.33%
Aetna Variable Encore Fund(2) 0.25% 0.10% 0.35%
Aetna Investment Advisers Fund,
Inc.(2) 0.25% 0.08% 0.33%
Aetna Ascent Variable Portfolio(2) 0.50% 0.15% 0.65%
Aetna Crossroads Variable Portfolio(2) 0.50% 0.15% 0.65%
Aetna Legacy Variable Portfolio(2) 0.50% 0.15% 0.65%
Alger American Growth Portfolio 0.75% 0.10% 0.85%
Alger American Small Cap Portfolio 0.85% 0.07% 0.92%
Calvert Responsibly Invested Balanced
Portfolio(3) 0.70% 0.13% 0.83%
Fidelity VIP II Contrafund
Portfolio(4) 0.61% 0.11% 0.72%
Fidelity VIP Equity-Income Portfolio 0.51% 0.10% 0.61%
Fidelity VIP Growth Portfolio 0.61% 0.09% 0.70%
Fidelity VIP Overseas Portfolio 0.76% 0.15% 0.91%
Franklin Government Securities
Trust(5) 0.63% 0.13% 0.76%
Janus Aspen Aggressive Growth
Portfolio(6) 0.75% 0.11% 0.86%
Janus Aspen Balanced Portfolio(6) 0.82% 0.55% 1.37%
Janus Aspen Flexible Income Portfolio 0.65% 0.42% 1.07%
Janus Aspen Growth Portfolio(6) 0.65% 0.13% 0.78%
Janus Aspen Short-Term Bond
Portfolio(6) 0.00% 0.70% 0.70%
Janus Aspen Worldwide Growth
Portfolio(6) 0.68% 0.22% 0.90%
Lexington Natural Resources Trust 1.00% 0.47% 1.47%
Neuberger & Berman Growth Portfolio(7) 0.84% 0.10% 0.94%
Scudder International Portfolio Class
A Shares 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) As of May 1, 1996, the Company will provide administrative services to the
Fund and will assume the Fund's ordinary recurring direct costs under an
Administrative Services Agreement. The "Other Expenses" shown are not based
on figures for the year ended December 31, 1995, but reflect the fee payable
under this Agreement.
(3)The Management and Advisory Fees are subject to a performance adjustment,
after July 1, 1996, which could cause the fee to be as high as 0.85% or as
low as 0.55%, depending on performance. "Other Expenses" reflect an indirect
fee of 0.02%. Net fund operating expenses after reductions for fees paid
indirectly would be 0.81%.
(4) A portion of the brokerage commissions the Fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have been
0.73% for the Contrafund Portfolio.
(5)An expense reimbursement arrangement was in effect until February 1, 1996;
however, it is no longer in effect. The advisory fee and total annual
expenses shown above reflect the actual expenses of the Fund before
reimbursement, as if such arrangement had not been in effect during 1995.
(6)The information for each Portfolio is net of fee waivers or reductions from
Janus Capital. Fee reductions for the Aggressive Growth, Balanced, Growth,
and Worldwide Growth Portfolios reduce the management fee to the level of the
corresponding Janus retail fund. Other waivers, if applicable, are first
applied against the management fee and then against other expenses. Without
such waivers or reductions, the Management Fee, Other Expenses and Total Fund
Annual Expenses would have been 0.82%, 0.11%, and 0.93% for
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
Aggressive Growth Portfolio; 1.00%, 0.55%, 1.55% for Balanced Portfolio;
0.85%, 0.13% and 0.98% for Growth Portfolio; 0.65%, 0.72% and 1.37% for
Short-Term Bond Portfolio; and 0.87%, 0.22% and 1.09% for Worldwide Growth
Portfolio; respectively. Janus Capital may modify or terminate the waivers or
reductions at any time upon 90 days' notice to the Portfolio's Board of
Trustees.
(7)Neuberger and Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investment
assets in a corresponding series ("Series") of Advisers Management Trust.
Expenses in the table reflect expenses of the Portfolio and include the
Portfolio's pro rata portion of the operating expenses of the Portfolio's
corresponding Series. The Portfolio pays Neuberger & Berman Management Inc.
("NBMI") an administration fee based on the Portfolio's net asset value. The
corresponding Series of the Portfolio pays NBMI a management fee based on the
Series' average daily net assets. Accordingly, this table combines management
fees at the Series level and administration fees at the Portfolio level in a
unified fee rate. (See "Expenses" in the Trust's prospectus.)
(8) The Portfolio's investment adviser pays all expenses of the Portfolio except
brokerage commissions, taxes, interest, fees, expenses of the non-interested
person directors (including counsel fees) and extraordinary expenses. These
expenses have historically represented a very small percentage (less than
0.01%) of total net assets in a fiscal year.
- --------------------------------------------------------------------------------
FEE TABLE - 3
<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.
The following Examples illustrate the expenses that would have been paid
assuming a $1,000 investment in the Contract and a 5% return on assets. For the
purposes of these Examples, the maximum maintenance fee of $15.00 that can be
deducted under the Contract has been converted to a percentage of assets equal
to 0.107%.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
------------------------------------- -------------------------------------
IF YOU WITHDRAW YOUR ENTIRE ACCOUNT IF YOU DO NOT WITHDRAW YOUR ACCOUNT
VALUE AT THE END OF THE PERIODS VALUE, OR IF YOU ANNUITIZE AT THE END
SHOWN, YOU WOULD PAY THE FOLLOWING OF THE PERIODS SHOWN, YOU WOULD PAY
EXPENSES, INCLUDING ANY APPLICABLE THE FOLLOWING EXPENSES (NO DEFERRED
DEFERRED SALES CHARGE: SALES CHARGE IS REFLECTED):*
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 $108 $150 $199 $17 $ 53 $ 92 $199
Aetna Variable Encore Fund $69 $109 $151 $202 $17 $ 54 $ 93 $202
Aetna Investment Advisers
Fund, Inc. $69 $108 $150 $199 $17 $ 53 $ 92 $199
Aetna Ascent Variable
Portfolio $71 $117 $166 $233 $20 $ 63 $108 $233
Aetna Crossroads Variable
Portfolio $71 $117 $166 $233 $20 $ 63 $108 $233
Aetna Legacy Variable
Portfolio $71 $117 $166 $233 $120 $ 63 $108 $233
Alger American Growth
Portfolio $74 $123 $176 $254 $22 $ 69 $118 $254
Alger American Small Cap
Portfolio $74 $125 $179 $261 $23 $ 71 $122 $261
Calvert Responsibly Invested
Balanced Portfolio $74 $123 $175 $252 $22 $ 68 $117 $252
Fidelity VIP II Contrafund
Portfolio $73 $120 $169 $241 $21 $ 65 $112 $241
Fidelity VIP Equity-Income
Portfolio $71 $116 $164 $229 $20 $ 62 $106 $229
Fidelity VIP Growth Portfolio $72 $119 $168 $239 $21 $ 64 $111 $239
Fidelity VIP Overseas
Portfolio $74 $125 $179 $260 $23 $ 71 $121 $260
Franklin Government Securities
Trust $73 $121 $171 $245 $21 $ 66 $114 $245
Janus Aspen Aggressive Growth
Portfolio $74 $124 $176 $255 $22 $ 69 $119 $255
Janus Aspen Balanced Portfolio $79 $138 $200 $306 $28 $ 85 $144 $306
Janus Aspen Flexible Income
Portfolio $76 $130 $186 $276 $25 $ 76 $129 $276
Janus Aspen Growth Portfolio $73 $121 $172 $247 $22 $ 67 $115 $247
Janus Aspen Short-Term Bond
Portfolio $72 $119 $168 $239 $21 $ 64 $111 $239
Janus Aspen Worldwide Growth
Portfolio $74 $125 $178 $259 $23 $ 71 $121 $259
Lexington Natural Resources
Trust $80 $141 $205 $315 $29 $ 88 $149 $315
Neuberger & Berman Growth
Portfolio $75 $126 $180 $263 $23 $ 72 $123 $263
Scudder International
Portfolio Class A Shares $76 $130 $187 $277 $25 $ 76 $130 $277
TCI Growth $75 $128 $183 $269 $24 $ 74 $126 $269
</TABLE>
- ------------------------------
* This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A).
- --------------------------------------------------------------------------------
FEE TABLE - 4
<PAGE>
CONDENSED FINANCIAL INFORMATION
AETNA PLUS CONTRACTS
(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, 1995 (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, 1995 AND THE INDEPENDENT
AUDITORS' REPORT THEREON, ARE INCLUDED IN THE STATEMENT OF ADDITIONAL
INFORMATION.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
-------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $10.778 $11.020 $10.454 $97.165 $77.845 $76.311
Value at end of period $14.077 $10.778 $11.020 $10.454(2) $97.165 $77.845
Increase (decrease) in value of
accumulation unit(1) 30.61% (2.20)% 5.41% (2) 24.82% 2.01%
Number of accumulation units
outstanding at end of period 188,964,022 114,733,035 44,166,470 21,250 20,948,226 18,362,906
AETNA INCOME SHARES
Value at beginning of period $10.360 $10.905 $10.068 $36.789 $31.192 $28.943
Value at end of period $12.098 $10.360 $10.905 $10.068(3) $36.789 $31.192
Increase (decrease) in value of
accumulation unit(1) 16.78% (5.00)% 8.31% (3) 17.94% 7.77%
Number of accumulation units
outstanding at end of period 21,379,976 11,713,354 4,084,142 3,870 7,844,412 6,984,793
AETNA VARIABLE ENCORE FUND
Value at beginning of period $10.528 $10.241 $10.048 $33.812 $32.138 $30.012
Value at end of period $11.026 $10.528 $10.241 $10.048(4) $33.812 $32.138
Increase (decrease) in value of
accumulation unit(1) 4.73% 2.80% 1.92% (4) 5.21% 7.08%
Number of accumulation units
outstanding at end of period 12,999,680 7,673,528 2,766,044 825 8,430,082 10,220,110
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $10.868 $11.057 $10.189 $12.736 $10.896 $10.437
Value at end of period $13.673 $10.868 $11.057 $10.189(6) $12.736 $10.896
Increase (decrease) in value of
accumulation unit(1) 25.81% (1.71)% 8.52% (6) 16.89% 4.40%
Number of accumulation units
outstanding at end of period 38,152,395 23,139,604 11,368,365 11,508 22,898,099 17,078,985
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.673
Increase (decrease) in value of
accumulation unit(1) 6.73%
Number of accumulation units
outstanding at end of period 393,053
AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.612
Increase (decrease) in value of
accumulation unit(1) 6.12%
Number of accumulation units
outstanding at end of period 294,673
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.580
Increase (decrease) in value of
accumulation unit(1) 5.80%
Number of accumulation units
outstanding at end of period 143,637
--------------
--------------
<CAPTION>
1989 1988 1987 1986
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $59.871 $52.885 $50.760 $43.205
Value at end of period $76.311 $59.871 $52.885 $50.760
Increase (decrease) in value of
accumulation unit(1) 27.46% 13.21% 4.19% 17.49%
Number of accumulation units
outstanding at end of period 17,142,820 16,455,396 16,497,406 16,578,251
AETNA INCOME SHARES
Value at beginning of period $25.574 $24.061 $23.308 $20.703
Value at end of period $28.943 $25.574 $24.061 $23.308
Increase (decrease) in value of
accumulation unit(1) 13.17% 6.29% 3.23% 12.58%
Number of accumulation units
outstanding at end of period 6,202,834 5,955,293 5,372,271 6,188,470
AETNA VARIABLE ENCORE FUND
Value at beginning of period $27.783 $26.171 $24.812 $23.504
Value at end of period $30.012 $27.783 $26.171 $24.812
Increase (decrease) in value of
accumulation unit(1) 8.02% 6.16% 5.48% 5.57%
Number of accumulation units
outstanding at end of period 8,286,033 8,154,644 7,326,151 6,692,947
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
AETNA ASCENT VARIABLE 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
AETNA CROSSROADS VARIABLE 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
AETNA LEGACY VARIABLE 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
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 5
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992
-------------- ------------ ------------- -------------
ALGER AMERICAN GROWTH PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
Value at beginning of period $10.000(7)
Value at end of period $10.157
Increase (decrease) in value of
accumulation unit(1) 1.57%
Number of accumulation units
outstanding at end of period 2,832,440
ALGER AMERICAN SMALL CAP
PORTFOLIO
Value at beginning of period $ 9.437 $ 9.959 $10.000(8)
Value at end of period $13.450 $ 9.437 $ 9.959
Increase (decrease) in value of
accumulation unit(1) 42.52% (5.24)% (0.41)%
Number of accumulation units
outstanding at end of period 15,036,765 6,339,407 781,836
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO*
Value at beginning of period $10.554 $11.036 $10.278 $10.000(9)
Value at end of period $13.527 $10.554 $11.036 $10.278
Increase (decrease) in value of
accumulation unit(1) 28.17% (4.37)% 7.37% 2.78%
Number of accumulation units
outstanding at end of period 966,098 521,141 144,168 2,556
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.397
Increase (decrease) in value of
accumulation unit(1) 3.97%
Number of accumulation units
outstanding at end of period 2,116,732
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $11.092
Increase (decrease) in value of
accumulation unit(1) 10.92%
Number of accumulation units
outstanding at end of period 1,660,304
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.066
Increase (decrease) in value of
accumulation unit(1) 0.66%
Number of accumulation units
outstanding at end of period 1,833,794
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $ 9.961
Increase (decrease) in value of
accumulation unit(1) (0.39)%
Number of accumulation units
outstanding at end of period 196,090
FRANKLIN GOVERNMENT SECURITIES
TRUST
Value at beginning of period $10.119 $10.642 $10.008 $10.000(9)
Value at end of period $11.762 $10.119 $10.642 $10.008
Increase (decrease) in value of
accumulation unit(1) 16.24% (4.91)% 6.33% 0.08%
Number of accumulation units
outstanding at end of period 717,760 325,365 167,137 5,559
--------------
--------------
<CAPTION>
ALGER AMERICAN GROWTH PORTFOLIO
<S> <C> <C> <C> <C>
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
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
FIDELITY VIP II CONTRAFUND PORTFOLI
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
FIDELITY VIP EQUITY-INCOME PORTFOLI
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
FIDELITY VIP GROWTH 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
FIDELITY VIP OVERSEAS 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>
- --------------------------------------------------------------------------------
AUV HISTORY - 6
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992
-------------- ------------ ------------- -------------
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
Value at beginning of period $10.581 $10.000(10)
Value at end of period $13.322 $10.581
Increase (decrease) in value of
accumulation unit(1) 25.91% 5.81%
Number of accumulation units
outstanding at end of period 4,887,060 753,862
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.850
Increase (decrease) in value of
accumulation unit(1) 8.50%
Number of accumulation units
outstanding at end of period 93,304
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $ 9.873 $10.000(10)
Value at end of period $12.077 $ 9.873
Increase (decrease) in value of
accumulation unit(1) 22.33% (1.27)%
Number of accumulation units
outstanding at end of period 315,361 28,543
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.870
Increase (decrease) in value of
accumulation unit(1) 8.70%
Number of accumulation units
outstanding at end of period 259,196
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.323
Increase (decrease) in value of
accumulation unit(1) 3.23%
Number of accumulation units
outstanding at end of period 32,696
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.877
Increase (decrease) in value of
accumulation unit(1) 8.77%
Number of accumulation units
outstanding at end of period 1,036,040
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.154 $10.877 $ 9.832 $10.000(9)
Value at end of period $11.720 $10.154 $10.877 $ 9.832
Increase (decrease) in value of
accumulation unit(1) 15.42% (6.65)% 10.63% (1.68)%
Number of accumulation units
outstanding at end of period 711,892 703,676 135,614 561
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $11.026 $11.747 $10.864 $10.000(9)
Value at end of period $14.345 $11.026 $11.747 $10.864
Increase (decrease) in value of
accumulation unit(1) 30.10% (6.14)% 8.13% 8.64%
Number of accumulation units
outstanding at end of period 3,331,218 1,865,104 546,559 10,645
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES
Value at beginning of period $12.687 $12.957 $ 9.578 $10.000(9)
Value at end of period $13.923 $12.687 $12.957 $ 9.578
Increase (decrease) in value of
accumulation unit(1) 9.74% (2.08)% 35.28% (4.22)%
Number of accumulation units
outstanding at end of period 7,323,208 6,558,946 1,020,233 5,232
--------------
--------------
<CAPTION>
JANUS ASPEN AGGRESSIVE GROWTH PORTF
<S> <C> <C> <C> <C>
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
JANUS ASPEN 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
JANUS ASPEN FLEXIBLE INCOME PORTFOL
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
JANUS ASPEN GROWTH 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
JANUS ASPEN SHORT-TERM BOND PORTFOL
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
JANUS ASPEN WORLDWIDE GROWTH PORTFO
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
LEXINGTON NATURAL RESOURCES 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
NEUBERGER & BERMAN GROWTH 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
SCUDDER INTERNATIONAL PORTFOLIO CLA
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>
- --------------------------------------------------------------------------------
AUV HISTORY - 7
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992
-------------- ------------ ------------- -------------
TCI GROWTH
<S> <C> <C> <C> <C> <C> <C>
Value at beginning of period $11.781 $12.069 $10.692 $10.000(9)
Value at end of period $15.253 $11.781 $12.069 $10.692
Increase (decrease) in value of
accumulation unit(1) 29.47% (2.39)% 12.88% 6.92%
Number of accumulation units
outstanding at end of period 21,986,645 12,853,828 3,667,821 2,254
<CAPTION>
TCI GROWTH
<S> <C> <C> <C> <C>
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>
(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 these 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) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during August 1995, when
the Fund became available under the Contract.
(8) 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.
(9) 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.
(10) The initial Accumulation Unit value was established at $10.000 during
October 1994, when the funds were first allocated to this option.
* Formerly Calvert Socially Responsible Series.
- --------------------------------------------------------------------------------
AUV HISTORY - 8
<PAGE>
CONDENSED FINANCIAL INFORMATION
MULTIPLE OPTION CONTRACTS
(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, 1995 (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, 1995 AND THE INDEPENDENT
AUDITORS' REPORT THEREON, ARE INCLUDED IN THE STATEMENT OF ADDITIONAL
INFORMATION.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
------------- ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $105.558 $107.925 $102.383 $ 97.165 $77.845 $76.311
Value at end of period $137.869 $105.558 $107.925 $102.383 $97.165 $77.845
Increase (decrease) in value
of accumulation unit(1) 30.61% (2.19)% 5.41% 5.37% 24.82% 2.01%
Number of accumulation units
outstanding at end of period 6,364,000 13,966,072 21,148,863 24,201,565 20,948,226 18,362,906
AETNA INCOME SHARES
Value at beginning of period $40.173 $42.283 $39.038 $36.789 $31.192 $28.943
Value at end of period $46.913 $40.173 $42.283 $39.038 $36.789 $31.192
Increase (decrease) in value
of accumulation unit(1) 16.78% (4.99)% 8.31% 6.11% 17.94% 7.77%
Number of accumulation units
outstanding at end of period 2,377,622 5,108,720 8,210,666 8,507,292 7,844,412 6,984,793
AETNA VARIABLE ENCORE FUND
Value at beginning of period $36.271 $35.282 $34.619 $33.812 $32.138 $30.012
Value at end of period $37.988 $36.271 $35.282 $34.619 $33.812 $32.138
Increase (decrease) in value
of accumulation unit(1) 4.73% 2.80% 1.92% 2.39% 5.21% 7.08%
Number of accumulation units
outstanding at end of period 1,836,260 3,679,802 5,086,515 7,534,662 8,430,082 10,220,110
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $14.270 $14.519 $13.379 $12.736 $10.896 $10.437
Value at end of period $17.954 $14.270 $14.519 $13.379 $12.736 $10.896
Increase (decrease) in value
of accumulation unit(1) 25.82% (1.71)% 8.52% 5.05% 16.89% 4.40%
Number of accumulation units
outstanding at end of period 9,193,181 21,990,186 30,784,750 34,802,433 22,898,099 17,078,985
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period $10.000(10)
Value at end of period $10.673
Increase (decrease) in value
of accumulation unit(1) 6.73%
Number of accumulation units
outstanding at end of period 8
AETNA CROSSROADS VARIABLE
PORTFOLIO
Value at beginning of period $10.000(10)
Value at end of period $10.612
Increase (decrease) in value
of accumulation unit(1) 6.12%
Number of accumulation units
outstanding at end of period 0
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period $10.000(10)
Value at end of period $10.580
Increase (decrease) in value
of accumulation unit(1) 5.80%
Number of accumulation units
outstanding at end of period 0
-------------
-------------
<CAPTION>
1989 1988 1987 1986
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $59.871 $52.885 $50.760 $43.205
Value at end of period $76.311 $59.871 $52.885 $50.760
Increase (decrease) in value
of accumulation unit(1) 27.46% 13.21% 4.19% 17.49%
Number of accumulation units
outstanding at end of period 17,142,820 16,455,396 16,497,406 16,578,251
AETNA INCOME SHARES
Value at beginning of period $25.574 $24.061 $23.308 $20.703
Value at end of period $28.943 $25.574 $24.061 $23.308
Increase (decrease) in value
of accumulation unit(1) 13.17% 6.29% 3.23% 12.58%
Number of accumulation units
outstanding at end of period 6,202,834 5,955,293 5,372,271 6,188,470
AETNA VARIABLE ENCORE FUND
Value at beginning of period $27.783 $26.171 $24.812 $23.504
Value at end of period $30.012 $27.783 $26.171 $24.812
Increase (decrease) in value
of accumulation unit(1) 8.02% 6.16% 5.48% 5.57%
Number of accumulation units
outstanding at end of period 8,286,033 8,154,644 7,326,151 6,692,947
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $10.000(2)
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
AETNA ASCENT VARIABLE PORTFOLI
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
AETNA CROSSROADS VARIABLE
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
AETNA LEGACY VARIABLE PORTFOLI
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>
- --------------------------------------------------------------------------------
AUV HISTORY - 9
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
------------- ------------- ------------- ----------- ----------- -----------
ALGER AMERICAN GROWTH PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
Value at beginning of period $10.000(10)
Value at end of period $11.715
Increase (decrease) in value
of accumulation unit(1) 17.15%
Number of accumulation units
outstanding at end of period 530,263
ALGER AMERICAN SMALL CAP
PORTFOLIO
Value at beginning of period $ 9.513 $10.072 $10.000(3)
Value at end of period $13.558 $ 9.513 $10.072
Increase (decrease) in value
of accumulation unit(1) 42.52% (5.55)% 0.72%
Number of accumulation units
outstanding at end of period 1,714,187 665,518 51,327
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO*
Value at beginning of period $13.990 $14.640 $13.726 $12.913 $11.233 $10.568
Value at end of period $17.951 $13.990 $14.640 $13.726 $12.913 $11.233
Increase (decrease) in value
of accumulation unit(1) 28.31% (4.44)% 6.66% 6.30% 14.96% 6.29%
Number of accumulation units
outstanding at end of period 856,361 743,464 705,415 503,006 355,851 148,576
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(11)
Value at end of period $11.763
Increase (decrease) in value
of accumulation unit(1) 17.63%
Number of accumulation units
outstanding at end of period 525,476
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(11)
Value at end of period $11.617
Increase (decrease) in value
of accumulation unit(1) 16.17%
Number of accumulation units
outstanding at end of period 628,582
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(10)
Value at end of period $10.198
Increase (decrease) in value
of accumulation unit(1) 1.98%
Number of accumulation units
outstanding at end of period 762
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(10)
Value at end of period $10.197
Increase (decrease) in value
of accumulation unit(1) 1.97%
Number of accumulation units
outstanding at end of period 1,302
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $14.190 $14.929 $14.050 $13.219 $11.545 $10.581
Value at end of period $16.495 $14.190 $14.929 $14.050 $13.219 $11.545
Increase (decrease) in value
of accumulation unit(1) 16.24% (4.95)% 6.26% 6.29% 14.50% 9.11%
Number of accumulation units
outstanding at end of period 809,414 804,457 960,629 810,155 627,552 178,761
-------------
-------------
<CAPTION>
1989
-------------
ALGER AMERICAN GROWTH PORTFOLI
<S> <C> <C> <C> <C>
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
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 $10.000(4)
Value at end of period $10.568
Increase (decrease) in value
of accumulation unit(1) 5.68%
Number of accumulation units
outstanding at end of period 20,710
FIDELITY VIP II CONTRAFUND POR
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
FIDELITY VIP EQUITY-INCOME POR
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
FIDELITY VIP GROWTH 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
FIDELITY VIP OVERSEAS PORTFOLI
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
Value at beginning of period $10.000(5)
Value at end of period $10.581
Increase (decrease) in value
of accumulation unit(1) 5.81%
Number of accumulation units
outstanding at end of period 25,258
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 10
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
------------- ------------- ------------- ----------- ----------- -----------
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
Value at beginning of period $12.169 $10.000(6)
Value at end of period $15.323 $12.169
Increase (decrease) in value
of accumulation unit(1) 25.91% 21.69%
Number of accumulation units
outstanding at end of period 1,280,953 393,553
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(10)
Value at end of period $10.853
Increase (decrease) in value
of accumulation unit(1) 8.53%
Number of accumulation units
outstanding at end of period 161
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $ 9.911 $10.000(7)
Value at end of period $12.124 $ 9.911
Increase (decrease) in value
of accumulation unit(1) 22.33% (0.89)%
Number of accumulation units
outstanding at end of period 3,345 1,555
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(10)
Value at end of period $11.859
Increase (decrease) in value
of accumulation unit(1) 18.59%
Number of accumulation units
outstanding at end of period 109,717
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period $10.000(10)
Value at end of period $10.393
Increase (decrease) in value
of accumulation unit(1) 3.93%
Number of accumulation units
outstanding at end of period 18,473
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(10)
Value at end of period $12.158
Increase (decrease) in value
of accumulation unit(1) 21.58%
Number of accumulation units
outstanding at end of period 314,653
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $ 9.412 $10.071 $ 9.193 $9.018 $9.608 $11.441
Value at end of period $10.862 $ 9.412 $10.071 $9.193 $ 9.018 $ 9.608
Increase (decrease) in value
of accumulation unit(1) 15.41% (6.54)% 9.55% 1.94% (6.14)% (16.02)%
Number of accumulation units
outstanding at end of period 530,562 533,016 341,771 198,338 144,139 75,052
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $13.398 $14.278 $13.536 $12.511 $ 9.769 $10.772
Value at end of period $17.430 $13.398 $14.278 $13.536 $12.511 $ 9.769
Increase (decrease) in value
of accumulation unit(1) 30.09% (6.16)% 5.48% 8.19% 28.07% (9.31)%
Number of accumulation units
outstanding at end of period 2,359,090 2,107,525 1,927,674 1,346,898 971,985 482,220
-------------
-------------
<CAPTION>
1989
-------------
JANUS ASPEN AGGRESSIVE GROWTH
<S> <C> <C> <C> <C>
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
JANUS ASPEN 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
JANUS ASPEN FLEXIBLE INCOME PO
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
JANUS ASPEN GROWTH 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
JANUS ASPEN SHORT-TERM BOND PO
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
JANUS ASPEN WORLDWIDE GROWTH P
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
LEXINGTON NATURAL RESOURCES TR
Value at beginning of period $10.000(4)
Value at end of period $11.441
Increase (decrease) in value
of accumulation unit(1) 14.41%
Number of accumulation units
outstanding at end of period 11,481
NEUBERGER & BERMAN GROWTH PORT
Value at beginning of period $10.000(4)
Value at end of period $10.772
Increase (decrease) in value
of accumulation unit(1) 7.72%
Number of accumulation units
outstanding at end of period 68,885
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 11
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
------------- ------------- ------------- ----------- ----------- -----------
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES**
<S> <C> <C> <C> <C> <C> <C>
Value at beginning of period $13.227 $13.508 $ 9.922 $10.239** $ 9.256 $10.306
Value at end of period $14.515 $13.227 $13.508 $ 9.922 $10.239 $ 9.256
Increase (decrease) in value
of accumulation unit(1) 9.74% (2.08)% 36.14% (3.10)% 10.62% (10.19)%
Number of accumulation units
outstanding at end of period 3,823,292 4,240,412 2,371,037 1,161,007 779,667 317,829
TCI GROWTH
Value at beginning of period $11.172 $11.443 $10.495 $10.000(9)
Value at end of period $14.464 $11.172 $11.443 $10.495
Increase (decrease) in value
of accumulation unit(1) 29.47% (2.37)% 9.03% 4.95%
Number of accumulation units
outstanding at end of period 1,784,552 1,608,362 1,016,894 232,832
<CAPTION>
1989
-------------
SCUDDER INTERNATIONAL PORTFOLI
<S> <C> <C> <C> <C>
Value at beginning of period $10.000(8)
Value at end of period $10.306
Increase (decrease) in value
of accumulation unit(1) 3.06%
Number of accumulation units
outstanding at end of period 32,906
--------
--------
TCI GROWTH
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>
(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 these charges would reduce the
investment results shown.
(2) The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.
(3) 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.
(4) The initial Accumulation Unit value was established at $10.000 on May 31,
1989, the date on which the Fund/Portfolio became available under the
Contract.
(5) The initial Accumulation Unit value was established at $10.000 on June 7,
1989, the date on which the Fund became available under the Contract.
(6) The initial Accumulation Unit value was established at $10.000 during June
1994, when funds were first received in this option.
(7) The initial Accumulation Unit value was established at $10.000 during
November 1994, when funds were first received in this option.
(8) The initial Accumulation Unit value was established at $10.000 on July 5,
1989, the date on which the Portfolio became available under the Contract.
(9) The initial Accumulation Unit value was established at $10.000 on September
21, 1992, the date on which the Portfolio became available under the
Contract.
(10) The initial Accumulation Unit value was established at $10.000 during July
1995, when the Fund became available under the Contract.
(11) The initial Accumulation Unit value was established at $10.000 during May
1995, when the Fund became available under the Contract.
* Formerly Calvert Socially Responsible Series.
** Formerly T. Rowe Price International Equity Fund. On April 27, 1992, the
Fund's assets were liquidated and merged into Scudder Variable Life
Investment Fund -- Managed International Portfolio. The Accumulation Unit
Value following the merger was $10.051.
- --------------------------------------------------------------------------------
AUV HISTORY - 12
<PAGE>
THE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc.,
which is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc.
and an indirect wholly owned subsidiary of Aetna Life and Casualty Company.
VARIABLE ANNUITY ACCOUNT C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company established Variable Annuity Account C (the "Separate Account")
in 1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"), and meets the
definition of "separate account" under federal securities laws. The Separate
Account is divided into "Subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.
Although the Company holds title to the assets in the Separate Account, such
assets are not chargeable with liabilities arising out of any other business
conducted by the Company. Income, gains or losses of the Separate Account are
credited to or charged against the assets of the Separate Account without regard
to other income, gains or losses of the Company. All obligations arising under
the Contracts are general corporate obligations of the Company.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FUNDS
The Contract Holder, or the Participant, if allowed by the Contract Holder,
may allocate Purchase Payments to one or more of the Subaccounts as designated
on the enrollment form. In turn, the Subaccounts invest in the corresponding
Funds at net asset value.
The Contract Holder may decide to offer only a select number of Funds under
its Plan, or it may decide to substitute shares of one Fund for shares of
another Fund currently held by the Separate Account. The availability of Funds
may be subject to regulatory authorization. In addition, the Company may add or
withdraw Funds, as permitted by applicable law. Not all Funds may be available
in all jurisdictions, under all Contracts, or in all Plans.
The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.
- -AETNA VARIABLE FUND seeks to maximize total return through investments in a
diversified portfolio of common stocks and securities convertible into common
stock.(1)
- -AETNA INCOME SHARES seeks to maximize total return, consistent with reasonable
risk, through investments in a diversified portfolio consisting primarily of
debt securities.(1)
- --------------------------------------------------------------------------------
1
<PAGE>
- -AETNA VARIABLE ENCORE 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.(1)
- -AETNA INVESTMENT ADVISERS FUND, INC. is a managed 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.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA ASCENT VARIABLE PORTFOLIO seeks to
provide capital appreciation by allocating its investments among equities and
fixed income securities. The Portfolio is managed for investors who generally
have an investment horizon exceeding 15 years, and who have a high level of
risk tolerance.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA CROSSROADS 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. The Portfolio is managed for investors who generally have an
investment horizon exceeding 10 years and who have a moderate level of risk
tolerance.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA LEGACY VARIABLE PORTFOLIO seeks to
provide total return consistent with preservation of capital by allocating its
investments among equities and fixed income securities. The Portfolio is
managed for investors who generally have an investment horizon exceeding five
years and who have a low level of risk tolerance.(1)
- -ALGER AMERICAN FUND--ALGER AMERICAN GROWTH PORTFOLIO seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities. The Portfolio primarily invests in equity securities of
companies which have a market capitalization of $1 billion or greater.(2)
- -ALGER AMERICAN FUND--ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks
long-term capital appreciation. Except during temporary defensive periods, the
Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market
capitalization within the range of companies included in the Russell 2000
Growth Index, updated quarterly. The Russell 2000 Growth Index is designed to
track the performance of small capitalization companies. At March 31, 1996, the
range of market capitalization of these companies was $20 million to $3.0
billion.(2)
- -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.(3)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II--CONTRAFUND PORTFOLIO
seeks maximum total return over the long term by investing mainly in equity
securities of companies that are undervalued or out-of-favor.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--EQUITY-INCOME PORTFOLIO
seeks reasonable income by investing primarily in income-producing equity
securities. In selecting investments, the Fund also considers the potential for
capital appreciation.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--GROWTH PORTFOLIO seeks
capital appreciation by investing mainly in common stocks, although its
investments are not restricted to any one type of security.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--OVERSEAS PORTFOLIO
seeks long-term growth by investing mainly in foreign securities (at least 65%
of the Fund's total assets in securities of issuers from at least three
countries outside of North America).(4)
- -FRANKLIN GOVERNMENT SECURITIES TRUST seeks income through investments in
obligations of the U.S. Government or its agencies or instrumentalities,
primarily GNMA obligations.(5)
- -JANUS ASPEN SERIES--AGGRESSIVE GROWTH PORTFOLIO is a NONDIVERSIFIED portfolio
that seeks long-term growth of capital in a manner consistent with the
preservation of capital. The Portfolio pursues its investment objective by
normally investing at least 50% of its equity assets in securities issued by
medium-sized companies. Medium-sized companies are those whose market
capitalizations fall within the range of companies in the S & P Midcap 400
Index, which as of December 29, 1995 included
- --------------------------------------------------------------------------------
2
<PAGE>
companies with capitalizations between approximately $118 million and $7.5
billion, but which is expected to change on a regular basis.(6)
- -JANUS ASPEN SERIES--BALANCED PORTFOLIO seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. The
Portfolio pursues its investment objective by investing 40%-60% of its assets
in equity securities selected primarily for their growth potential and 40%-60%
of its assets in fixed-income securities selected primarily for their income
potential.(6)
- -JANUS ASPEN SERIES--FLEXIBLE INCOME PORTFOLIO seeks to obtain maximum total
return, consistent with preservation of capital. Total return is expected to
result from a combination of current income and capital appreciation. The
Portfolio invests in all types of income producing securities and may have
substantial holdings of debt securities rated below investment grade (e.g.,
junk bonds). High yield, high risk securities involve certain risks. See the
Fund's prospectus for a discussion of these risks.(6)
- -JANUS ASPEN SERIES--GROWTH PORTFOLIO seeks long-term growth of capital in a
manner consistent with the preservation of capital. The Portfolio pursues its
investment objective by investing in common stocks of companies of any size.(6)
- -JANUS ASPEN SERIES--SHORT-TERM BOND PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital. The Portfolio pursues its
investment objective by investing primarily in short-and intermediate-term
fixed income securities.(6)
- -JANUS ASPEN SERIES--WORLDWIDE GROWTH PORTFOLIO seeks long-term growth of
capital in a manner consistent with preservation of capital. The Portfolio
pursues its investment objective primarily through investments in common stocks
of foreign and domestic issuers.(6)
- -LEXINGTON NATURAL RESOURCES TRUST is a NONDIVERSIFIED portfolio that seeks
long-term growth of capital through investment primarily in common stocks of
companies which own or develop natural resources and other basic commodities or
supply goods and services to such companies.(7)
- -NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST-- GROWTH PORTFOLIO seeks capital
appreciation without regard to income. The Portfolio pursues its investment
objective by investing in common stocks, often of companies that may be
temporarily out of favor in the market.(8)
- -SCUDDER VARIABLE LIFE INVESTMENT FUND-- INTERNATIONAL PORTFOLIO CLASS A SHARES
seeks long-term growth of capital primarily through diversified holdings of
marketable foreign equity investments.(9)
- -TCI PORTFOLIOS, INC.--TCI GROWTH (a Twentieth Century fund) seeks capital
growth. The Fund seeks to achieve its objective by investing in common stocks
(including securities convertible into common stocks) and other securities that
meet certain fundamental and technical standards of selection and, in the
opinion of the Fund's investment manager, have better than average potential
for appreciation.(10)
Investment Advisers for each of the Funds:
(1) Aetna Life Insurance and Annuity Company
(2) Fred Alger Management, Inc.
(3) Calvert Asset Management Company, Inc.
(4) Fidelity Management & Research Company
(5) Franklin Advisers, Inc.
(6) Janus Capital Corporation
(7) Lexington Management Corporation (adviser); Market Systems Research
Advisors, Inc. (subadviser)
(8) Neuberger & Berman Management Incorporated
(9) Scudder, Stevens & Clark, Inc.
(10) Investors Research Corporation
RISKS ASSOCIATED WITH INVESTMENT IN THE FUNDS. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The use
of certain derivatives may involve high risk of volatility to a Fund, and the
use of leverage in connection with such derivatives can also increase risk of
losses. Some of the Funds may also invest in foreign or international securities
which involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential risks,
is found in the respective Fund prospectuses which accompany this Prospectus.
You should read the Fund prospectuses and consider carefully, and on a
continuing basis, which Fund or combination of Funds is best suited to your
long-term investment objectives.
CONFLICTS OF INTEREST (MIXED AND SHARED FUNDING). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may
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3
<PAGE>
also be used for funding variable life insurance contracts issued by the Company
or by third parties. This is referred to as "mixed funding."
Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in a
Fund, which might force that Fund to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. Each Fund's
Board of Directors or Trustees has agreed to monitor events in order to identify
any material irreconcilable conflicts which might arise and to determine what
action, if any, should be taken to address such conflict.
CREDITED INTEREST OPTIONS
Purchase Payments may be allocated to one or more of the Credited Interest
Options available under the Contract as described below. The Contract Holder may
elect not to offer all Credited Interest Options under its Plan.
- - The Guaranteed Accumulation Account (GAA) is a credited interest option
through which we guarantee stipulated rates of interest for stated periods of
time. Amounts must remain in the GAA for the full guaranteed term to receive
the quoted interest rates, or a market value adjustment (which may be positive
or negative) will be applied. (See Appendix I.)
- - The Fixed Account is a part of the Company's general account. The Fixed
Account guarantees a minimum interest rate, as specified in the Contract. The
Company may credit higher interest rates from time to time. Transfers from the
Fixed Account are limited. (See Appendix II.)
- - The Fixed Plus Account is also a part of the Company's general account and
guarantees a minimum interest rate, as specified in the Contract. The Company
may credit higher interest rates in its discretion. Withdrawals and transfers
from the Fixed Plus Account are limited. (See Appendix III.)
PURCHASE
- --------------------------------------------------------------------------------
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CONTRACT AVAILABILITY
The Contracts are designed to fund Plans adopted by (1) nonprofit healthcare
organizations and certain tax-exempt nonhealthcare (Section 501(c)(3))
organizations for their employees under Section 403(b) of the Code, and (2)
certain tax-exempt organizations or their for-profit subsidiaries in connection
with qualified defined contribution plans under Section 401(a)/401(k) of the
Code. The Contract Holder must notify the Company whether Title I of the
Employee Retirement Income Security Act of 1974 ("ERISA"), as amended by
subsequent law, including the Retirement Equity Act of 1984, applies to the
Plan.
PURCHASING INTERESTS IN THE CONTRACT
Eligible organizations may acquire the Contract by submitting an application
to the Company. Once we approve the application, a group Contract is issued to
the employer or association as the group Contract Holder. Participants may
purchase interests in a group Contract by submitting an enrollment form to the
Company.
The Company must accept or reject the application or enrollment form within
two business days of receipt. If the enrollment materials are incomplete, the
Company may hold any forms and accompanying Purchase Payments for five days.
Purchase Payments may be held for longer periods pending acceptance of the forms
only with the consent of the Participant, or under limited circumstances, with
the consent of the Contract Holder. If we agree to hold Purchase Payments for
longer than five business days based on the consent of the Contract Holder, the
Purchase Payments will be deposited in the Aetna Variable Encore Fund Subaccount
until the forms are completed.
PURCHASE PAYMENTS
The Contract provides for the establishment of two types of Accounts on
behalf of each Participant. Employer Accounts will be credited with Purchase
Payments made by the employer (Contract Holder). Employee Accounts will be
credited with Purchase Payments derived from employee salary reduction
contributions. If such payments are continuing, periodic payments made by you or
the employer, the Employee or Employer Accounts will be designated as
"Installment Purchase Payment Accounts." If such payments are lump sum transfers
of amounts accumulated under a pre-existing plan that meet
- --------------------------------------------------------------------------------
4
<PAGE>
the Company's minimums and other requirements at the time of purchase, such
payments will be placed in either Employer Accounts or Employee Accounts as
instructed by the Contract Holder, and such Accounts will be designated as
"Single Purchase Payment Accounts."
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from a Participant's gross income. (See "Tax Status.")
ALLOCATION OF PURCHASE PAYMENTS. Purchase Payments will initially be
allocated to the Subaccounts or Credited Interest Options as specified by the
Contract Holder or the Participant, if allowed by the Contract Holder, on the
enrollment form. Changes in such allocation may be made in writing or by
telephone transfer. Allocations must be in whole percentages, and there may be
limitations on the number of investment options that can be selected during the
Accumulation Period. (See "Transfers.")
RIGHTS UNDER THE CONTRACT
The Contract Holder has all rights, title and interest in the amounts held
under the Contract or in the Account; the Contract Holder makes all elections
under the Contract. Participants have no rights to direct the Company as to
payments under the Contract unless countersigned by the Contract Holder.
Benefits payable to Participants are governed exclusively by the Plan. The
Company is not a party to the Plan.
Participants have a nonforfeitable right to the value of their Employee
Account pursuant to Code Section 403(b) and the terms of the Plan as interpreted
by the Contract Holder. Participants have a nonforfeitable right to the value of
the Employer Account pursuant to the terms of, and to the extent of the
Participant's vested percentage under, the Plan as interpreted by the Contract
Holder.
The Contract Holder and each Participant have agreed in writing to the terms
and conditions of the Contract, to have the Contract Holder make all choices
under the Contract, and to be bound by the Contract Holder's directions to the
Company. (See Appendix IV.)
In addition to the responsibilities mentioned elsewhere in this Prospectus,
the Contract Holder must:
- - maintain all Participant vesting percentages and records;
- - certify that all distributions are made in accordance with the terms of the
Plan; and
- - ensure that the Plan meets certain nondiscrimination requirements imposed by
the Code.
TRANSFER CREDITS
The Company may provide a transfer credit on "transferred assets," subject
to certain conditions and state approvals. Transferred assets are the value of
contributions made on your behalf under this Plan or a prior plan before such
amounts are applied to this Contract. 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 a transfer credit is applied to
your Contract, all provisions of the Contract apply. This benefit is provided on
a non-discriminatory basis. If a transfer credit is due under the Contract, you
will be provided with additional information specific to the Contract.
RIGHT TO CANCEL
The Contract Holder may cancel participation under the Contract without
penalty by returning it to the Company with a written notice of cancellation. In
most states, Contract Holders have ten days to exercise this right; some states
allow a longer free-look period. When we receive the request for cancellation,
we will return the Account Value, unless the laws of the state in which the
Contract was issued require that we return the initial Purchase Payment (if
greater than the Account Value). In states that do not require a return of
Purchase Payments, the purchaser bears the entire investment risk for amounts
allocated among the Subaccounts during the free look period. Account Values will
be determined as of the Valuation Date on which we receive the request for
cancellation at our Home Office.
CHARGES AND DEDUCTIONS
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- --------------------------------------------------------------------------------
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. The Company makes a daily deduction from
each of the Subaccounts for the mortality and expense risk charge. The Charge is
equal, on an annual basis, to 1.25% of the daily net assets of the Subaccounts
and compensates the
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5
<PAGE>
Company for the assumption of the mortality and expense risks under the
Contract. The mortality risks are those assumed for our promise to make lifetime
payments according to annuity rates specified in the Contract. The expense risk
is the risk that the actual expenses for costs incurred under the Contract will
exceed the maximum costs that can be charged under the Contract.
If the amount deducted for mortality and expense risks is not sufficient to
cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.
ADMINISTRATIVE EXPENSE CHARGE. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative charge. The
administrative expense charge compensates the Company for administrative
expenses that exceed revenues from the maintenance fee described below. The
charge is set at a level which does not exceed the average expected cost of the
administrative services to be provided while the Contract is in force. The
Company does not expect to make a profit from this charge.
Under the Contract, the amount of the administrative expense charge may be
of an amount equal, on an annual basis, to a maximum of 0.25% of the daily net
assets of the Subaccounts. There is currently no administrative expense charge
during the Accumulation Period or Annuity Period. Once an Annuity Option is
elected, the charge will be established and will be effective during the entire
Annuity Period.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee from the Account Value of each Participant who has an
Installment Purchase Payment Account. No maintenance fee will be deducted from
any Account designated as a Single Purchase Payment Account. The maintenance fee
is to reimburse the Company for some of its administrative expenses relating to
the establishment of the Accounts.
The maximum maintenance fee that can be deducted for each Participant is
$15. However, the maintenance fee may be reduced or eliminated depending upon
certain criteria described below. At the election of the employer, the
maintenance fee may be deducted from the Participant's Employee Account,
Employer Account, or a portion from each Account. The Company may send a bill to
the employer at or prior to such deduction. The maintenance fee will be deducted
on a pro rata basis from each Subaccount and Credited Interest Option in which
you have an interest. If the Account Value is withdrawn, the full maintenance
fee will be deducted at the time of withdrawal.
REDUCTION OR ELIMINATION OF THE MAINTENANCE FEE. The annual maintenance fee
may be reduced or eliminated under various conditions as agreed to by us and by
the Contract Holder in writing. Any reduction or elimination of the annual
maintenance fee will reflect differences in administrative costs and services
after taking into consideration factors such as the following:
- - the size, characteristics, and nature of the group to which a Contract is
issued;
- - the level 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.
Any reduction or elimination of maintenance fees will not be unfairly
discriminatory against any person. We will make any reduction in annual
maintenance fees according to our own rules in effect at the time an application
for a Contract is approved. We reserve the right to change these rules from time
to time.
DEFERRED SALES CHARGE
Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of the amounts
withdrawn from the Subaccounts, the Fixed Account and the Guaranteed
Accumulation Account. No deferred sales charge is deducted from amounts
withdrawn from the Fixed Plus Account.
For Installment Purchase Payment Accounts, the deferred sales charge is
based on the number of completed Purchase Payment Periods. For Single Purchase
Payment Accounts, it is based on the number of Contract Years that have elapsed
since the Contract
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6
<PAGE>
effective date. The amount of the deferred sales charge is determined in
accordance with the schedule set forth in the following tables:
<TABLE>
<CAPTION>
INSTALLMENT PURCHASE PAYMENT ACCOUNTS:
DEFERRED SALES
PURCHASE PAYMENT CHARGE
PERIODS COMPLETED 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 more but less than 10 2%
More than 10 0%
<CAPTION>
SINGLE PURCHASE PAYMENT ACCOUNTS:
DEFERRED SALES
ACCOUNT YEARS CHARGE
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>
Generally, if you transfer the total account value under another similar
annuity contract issued by the Company to an Account under this Contract, the
effective date of the new Account will be the same effective date as your former
contract for the purpose of calculating the applicable deferred sales charge
under this Contract.
A deferred sales charge will not be deducted from any portion of the Account
Value if the withdrawal is:
- - due to the Participant's separation from service with the Employer (the
employer must submit documentation satisfactory to the Company confirming that
the Participant is no longer providing services to the employer);
- - applied to provide Annuity benefits;
- - taken on or after the tenth anniversary of the effective date of the Account;
- - paid due to your death before Annuity payments begin;
- - made due to the election of an Additional Withdrawal Option (see "Additional
Withdrawal Options");
- - due to financial hardship as specified in the Code;
- - paid where the Account Value of any one Account 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; or
- - taken from an installment Purchase Payment Account by a Participant who is at
least age 59 1/2 and who has completed nine or more Purchase Payment Periods.
Where the Company is the exclusive variable annuity provider for a Plan, and
the Plan also offers a 403(b)(7) custodial arrangement providing retail mutual
funds with only one fund family where the Company or an affiliate is the
recordkeeper, the deferred sales charge will also be waived if such withdrawal
is due to a transfer to a 403(b)(7) option under the custodial arrangement
described above.
The deduction for the deferred sales charge will not exceed 8.5% of the
total Purchase Payments actually made to the Account. The Company does not
anticipate that the deferred sales charge will cover all sales and
administrative expenses which it incurs in connection with the Contract. The
difference will be covered by the general assets of the Company which are
attributable, in part, to mortality and expense risk charges under the Contract
described above.
FREE WITHDRAWALS. For Participants between the ages of 59 1/2 and 70 1/2, up
to 10% of the current Account Value may be withdrawn during each calendar year
without imposition of a Deferred Sales Charge. The free withdrawal applies only
to the first partial withdrawal in each calendar year. The 10% amount will be
based on the Account Value calculated on the Valuation Date next following our
receipt of the request for withdrawal. Any outstanding contract loans are
excluded from the Account Value when calculating the 10% free withdrawal amount.
This provision does not apply to a full withdrawal of the Account, or to any
withdrawal due to a default on a contract loan (see "Contract Loans"). This
provision may not be exercised if SWO is elected. (See "Additional Withdrawal
Options.")
In the instances cited above, no deferred sales charge is deducted. However,
the amount withdrawn may be subject to the 10% federal penalty tax.
REDUCTION OR ELIMINATION OF THE DEFERRED SALES CHARGE. For a particular
Plan, we may reduce, waive or eliminate the deferred sales charge. Any
reduction, waiver or elimination of such charges will reflect differences or
expected differences in the amounts of unrecovered distribution costs or
services of the types that the charge is intended to defray. When considering
whether to reduce or eliminate such charges or to grant such a waiver, we will
take into account factors which may include the following:
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<PAGE>
- - the number of participants under the Plan;
- - the expected level of assets or cash flow under the Plan;
- - the level of agent involvement in sales activities;
- - the level of our sales-related expenses;
- - the specific distribution provisions under the Plan;
- - the Plan's purchase of one or more other variable annuity contracts from us
and the features of those contracts;
- - the level of employer involvement in determining eligibility for distributions
under the Contract; and
- - our assessment of financial risk to the Company relating to surrenders.
Any reduction, waiver or elimination of deferred sales charges will not be
unfairly discriminatory against any person.
We may also negotiate provisions regarding the deferred sales charge with
respect to Contracts issued to certain employer groups or associations which
have negotiated on behalf of its employees. All variations in, or elimination
of, provisions regarding the deferred sales charge resulting from such
negotiations will be offered uniformly to all employees within the group. For
specific information on fees applicable to your Account, please call the number
listed under the "Inquiries" section.
We will make any reduction in deferred sales charge according to our own
rules in effect at the time an application for a Contract is approved. We
reserve the right to change these rules from time to time.
DEFERRED SALES CHARGE SCHEDULE FOR GAA FOR CERTAIN NEW YORK CONTRACTS
The following deferred sales charge schedule applies for withdrawals from
the Guaranteed Accumulation Account for group master Contracts, where available,
which are issued after July 29, 1993 in the State of New York. This schedule is
based on the number of completed Account Years, as follows:
<TABLE>
<CAPTION>
DEFERRED SALES
COMPLETED CHARGE
ACCOUNT YEARS DEDUCTION
- -------------------- ---------------
<S> <C>
Less than 3 5%
3 or more but less
than 4 4%
4 or more but less
than 5 3%
5 or more but less
than 6 2%
6 or more but less
than 7 1%
7 or more 0%
</TABLE>
FUND EXPENSES
Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund prospectuses.
PREMIUM AND OTHER TAXES
Several states and municipalities impose a premium tax on Annuities. These
taxes currently range from 0% to 4%. The Company reserves the right to deduct
premium tax against Purchase Payments or Account Values at any time, but no
earlier than when we have a tax liability under state law. The Company's current
practice is to deduct for premium taxes at the time of complete withdrawal or
annuitization. In addition to the premium tax, the Company reserves the right to
assess a charge for any state or federal taxes due against the Contract or the
Separate Account assets. (See "Tax Status.")
CONTRACT VALUATION
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ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in any of the Credited Interest Options.
ACCUMULATION UNITS
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately
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preceding Valuation Date by the net investment factor of that Subaccount for the
period between the immediately preceding Valuation Date and the current
Valuation Date. (See "Net Investment Factor" below.) The Accumulation Unit Value
will be affected by the investment performance, expenses and charges of the
applicable Fund and is reduced each day by a percentage that accounts for the
daily assessment of mortality and expense risk charges and the administrative
charge (if any).
Initial Purchase Payments will be credited to your Account as described
under "Purchasing Interests in the Contract." Each subsequent Purchase Payment
(or amount transferred) will be credited to your Account at the AUV computed on
the next Valuation Date following our receipt of your payment or transfer
request. The value of an Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance of a
Subaccount from one Valuation Date to the next. The net investment factor for a
Subaccount for any valuation period is equal to the sum of 1.000 plus the net
investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current
Valuation Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding
Valuation Date, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation of
the Subaccount;
(d) divided by the total value of the Subaccount's Accumulation and Annuity
Units preceding the Valuation Date;
(e) minus a daily charge at the annual effective rate of 1.25% for mortality
and expense risks and up to 0.25% as an administrative expense charge
(currently 0%).
The net investment rate may be either positive or negative.
TRANSFERS
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- --------------------------------------------------------------------------------
At any time prior to the Annuity Date, the Contract Holder (or you, if
authorized by the Contract Holder) can transfer amounts held under your Contract
from one Subaccount to another. Transfers between the Credited Interest Options
and the Subaccounts are subject to certain restrictions. (See Appendices I, II
and III.) A request for transfer can be made either in writing or by telephone.
The telephone transfer privilege is available automatically; no special election
is necessary. All transfers must be in accordance with the terms of the Contract
and your employer's Plan, as applicable.
The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge. The minimum transfer amount may not
be less than $500. However, the total number of investment options that you may
select during the Accumulation Period may be limited, as set forth on your
enrollment form. Any transfer will be based on the Accumulation Unit Value next
determined after the Company receives a valid transfer request at its Home
Office. Transfers are currently not available during the Annuity Period;
however, they may be available under some Annuity Options beginning later in
1996. (See "Annuity Period -- Annuity Options.")
DOLLAR COST AVERAGING PROGRAM
The Contract Holder (or you, if authorized) may establish automated
transfers of Account Values on a monthly or quarterly basis through the
Company's Dollar Cost Averaging Program, if available under your Plan. Dollar
Cost Averaging is a system for investing a fixed amount of money at regular
intervals over a period of time. Dollar Cost Averaging does not ensure a profit
nor guarantee against loss in a declining market. You should consider your
financial ability to continue purchases through periods of low price levels.
Please refer to the "Inquiries" section of the prospectus summary which
describes how you can obtain further information.
WITHDRAWALS
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The Contract Holder, on your behalf, may withdraw all or a portion of the
Account Value at any time during the Accumulation Period, subject to the
withdrawal restrictions under Section 403(b) Contracts described below, and to
the limitations on withdrawals from the Fixed Plus Account. To request a
withdrawal, the Contract Holder, on your behalf, must properly complete a
disbursement form and send it to our Home Office. If you
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9
<PAGE>
are married and are participating in a Plan subject to ERISA, the Contract
Holder must provide written certification that the applicable Retirement Equity
Act requirements have been met. Payments for withdrawal requests will be made in
accordance with SEC requirements, but normally not later than seven calendar
days following our receipt of a disbursement form.
Withdrawals may be requested in one of the following forms:
- -FULL WITHDRAWAL OF THE CONTRACT: The amount paid upon a full withdrawal will be
the Account Value of all Accounts allocated to the Subaccounts, the Guaranteed
Accumulation Account (plus or minus a market value adjustment) (see Appendix
I), and the Fixed Account, minus any applicable deferred sales charge and
maintenance fee due, plus the amount available for withdrawal from the Fixed
Plus Account (see Appendix III).
- -FULL WITHDRAWAL OF AN ACCOUNT: The amount paid for a full withdrawal will be
the Account Value allocated to the Subaccounts, the Guaranteed Accumulation
Account (plus or minus a market value adjustment) (see Appendix I), and the
Fixed Account, minus any applicable deferred sales charge and maintenance fee
due, plus the amount available for withdrawal from the Fixed Plus Account (see
Appendix III).
- -PARTIAL WITHDRAWALS (Percentage): The amount paid will be the percentage of the
Account Value requested minus any applicable deferred sales charge; however,
amounts available for withdrawal from the Fixed Plus Account are limited (see
Appendix III).
- -PARTIAL WITHDRAWAL (Specified Dollar Amount): The amount paid will be the
dollar amount requested. However, the amount withdrawn from the Account will
equal the amount requested plus any applicable deferred sales charge. The
amount available for withdrawal from the Fixed Plus Account is limited (see
Appendix III).
For any partial withdrawal, amounts will be withdrawn proportionately from
each Subaccount or Credited Interest Option in which the Account is invested,
unless requested otherwise in writing by the Contract Holder. All amounts paid
will be based on Account Values as of the next Valuation Date after we receive a
request for withdrawal at our Home Office, or on such later date as the
disbursement form may specify. A 20% federal income tax may be withheld from
amounts paid directly to you. (See "Tax Status -- Contracts Used with Certain
Retirement Plans.")
WITHDRAWAL RESTRICTIONS FROM 403(B) PLANS. Under Section 403(b) Contracts, a
withdrawal of salary reduction contributions and earnings on such contributions
is generally prohibited prior to the Participant's death, disability, attainment
of age 59 1/2, separation from service or financial hardship. (See "Tax
Status.")
REINVESTMENT PRIVILEGE
The Contract Holder may elect to reinvest all or a portion of the proceeds
received from a full withdrawal of an Account within 30 days after such
withdrawal has been made. Accumulation Units will be credited to the Account for
the amount reinvested, as well as any maintenance fee and 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
amounts reinvested. Reinvested amounts will be reallocated to the applicable
investment options in the same proportion as they were allocated at the time of
withdrawal. Accumulation Units will be credited to the Account based on the
Accumulation Unit Value next computed following our receipt of the request along
with the amount to be reinvested. The reinvestment privilege may be used only
once. See Appendix I for a discussion of amounts withdrawn from GAA and then
reinvested. If you are contemplating reinvestment, you should seek competent
advice regarding the tax consequences associated with such a transaction.
CONTRACT LOANS
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During the Accumulation Period, a Contract Holder of a 403(b) Plan may
request (on your behalf) a loan from the your Employee Account. The Contract
Holder may also authorize contract loans from the value of the Employer Account
(check with the Contract Holder to see if this is available). Loans can only be
taken from those Account Values held in the Subaccounts or from those Credited
Interest Options that allow loans. (See Appendices I, II and III.) A loan may be
obtained by reviewing and reading the terms of the loan agreement, properly
completing a loan request form and submitting it to the Company's Home Office.
Loans are not available from Contracts issued to 401(a)/401(k) Plans.
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<PAGE>
ADDITIONAL WITHDRAWAL OPTIONS
- --------------------------------------------------------------------------------
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The Company offers certain withdrawal options under the Contract that are
not considered annuity options ("Additional Withdrawal Options"). To exercise
these options, the Account Value must meet the minimum dollar amounts and age
criteria applicable to that option.
The Additional Withdrawal Options currently available under the Contract
include the following:
- -SWO--SYSTEMATIC WITHDRAWAL OPTION. SWO is a series of partial withdrawals from
your Account based on a payment method you select. It is designed for those who
want a periodic income while retaining investment flexibility for amounts
accumulated under a Contract. (This option may not be elected if you have an
outstanding contract loan.)
- -ECO--ESTATE CONSERVATION OPTION. 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 at age 70 1/2 or retirement, if later, for
governmental or church plans, and pays you that amount once a year. (See "Tax
Status.")
Other Additional Withdrawal Options may be added from time to time. Additional
information relating to any of the Additional Withdrawal Options may be obtained
from your local representative or from the Company at its Home Office. For
Contracts issued in the state of New York, no market value adjustment will be
imposed on withdrawals from GAA for SWO or ECO.
If one of the Additional Withdrawal Options is selected, your Account will
retain all of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus.
Once elected, an Additional Withdrawal Option may be revoked by the Contract
Holder any time by submitting a written request to our Home Office. Once an
option is revoked, it may not be elected again, nor may any other Additional
Withdrawal Options be elected unless permitted by the Code. The Company reserves
the right to discontinue the availability of one or all of these Additional
Withdrawal Options at any time, and/or to change the terms of future elections.
DEATH BENEFIT DURING ACCUMULATION PERIOD
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The Contract provides that a death benefit is payable to the Contract
Beneficiary(ies) upon the death of the Participant before the Annuity Date. The
amount of the death benefit will be equal to the Account Value. Death benefit
proceeds may be paid to the Plan Beneficiary (as directed in writing by the
Contract Holder):
- - in a lump sum;
- - in accordance with any of the Annuity Options available under the Contract; or
- - under any Additional Withdrawal Options available under the Contract (if the
Plan Beneficiary is your spouse).
The Contract Holder, on behalf of the Plan Beneficiary, may instead elect
one of the following two options; however, the Code limits how long the death
benefit proceeds may be left in these options (see below):
- - to leave the Account Value invested in the Contract; or
- - to leave the Account Value on deposit in the Company's general account, and to
receive monthly, quarterly, semi-annual or annual interest payments at the
interest rate then being credited on such deposits. The balance on deposit can
be withdrawn at any time or applied to an Annuity Option.
When paying the Plan Beneficiary, we will determine the Account Value on the
Valuation Date following the date on which we receive proof of death acceptable
to the Company. Interest, if any, will be paid from the date of death at a rate
no less than required by law. We will mail
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payment to the Contract Holder, or to the Plan Beneficiary, if requested by the
Contract Holder, within seven days after we receive proof of death.
The Code requires that distribution of death proceeds begin within a certain
period of time. Generally, if your Plan Beneficiary is not your spouse either
annuity payments must begin by December 31 of the year following the year of
your death, or the entire value of your benefits must be distributed by December
31 of the fifth year following the year of your death. If your Plan Beneficiary
is your spouse, he or she is not required to begin distributions until the year
in which you would have attained age 70 1/2. In no event may payments extend
beyond the life expectancy of the Plan Beneficiary or any period certain greater
than the Plan Beneficiary's life expectancy. If no elections are made, no
distributions will be made. Failure to commence distributions within the above
time periods can result in tax penalties. Regardless of the method of payment,
death benefit proceeds will generally be taxed to the beneficiary in the same
manner as if you had received those payments. (See "Tax Status.")
ANNUITY PERIOD
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ANNUITY PERIOD ELECTIONS
The Code generally requires that minimum annual distributions of the Account
Value must begin by April 1st of the calendar year following the calendar year
in which a Participant attains age 70 1/2 (or retires, if later, for
governmental and church plans). In addition, distributions must be in a form and
amount sufficient to satisfy the Code requirements. These requirements may be
satisfied by the election of certain Annuity Options or Additional Withdrawal
Options. (See "Tax Status.")
At least 30 days prior to the Annuity Date, the Contract Holder, on your
behalf, must notify us in writing of the following:
- - the date on which you would like to start receiving Annuity payments;
- - the Annuity option under which you want your payments to be calculated and
paid;
- - whether the payments are to be made monthly, quarterly, semi-annually or
annually; and the investment option(s) used to provide Annuity payments (i.e.,
a fixed annuity using the general account or a variable annuity using any of
the Subaccounts available at the time of annuitization). As of the date of
this Prospectus, Aetna Variable Fund, Aetna Income Shares and Aetna Investment
Advisers Fund, Inc. are the only Subaccounts available; however, additional
Subaccounts may be available under some Annuity Options in the future. (See
"Annuity Options.")
Annuity Payments will not begin until you have selected an Annuity Option.
Until a date and option are elected, the Account will continue in the
Accumulation Period. Once Annuity payments begin, the Annuity Option may not be
changed, nor may transfers currently be made among the investment option(s)
selected. (See "Annuity Options" below for more information about transfers
during the Annuity Period.)
ANNUITY OPTIONS
The Contract Holder, on behalf of the Participant, may choose one of the
following Annuity Options:
LIFETIME ANNUITY OPTIONS:
- -OPTION 1--Life Annuity--An annuity with payments ending on the Annuitant's
death.
- -OPTION 2--Life Annuity with Guaranteed Payments--A life annuity with payments
guaranteed for 5, 10, 15 or 20 years, or such other periods as the Company may
offer at the time of annuitization.
- -OPTION 3--Life Income based Upon the Lives of Two Payees--An annuity will be
paid during the lives of the Annuitant and a second Annuitant, with 100%,
66 2/3% or 50% of the payment to continue after the first death, or 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.
- -OPTION 4--Life Income based Upon the Lives of Two Payees--An annuity with
payments for a minimum of 120 months, with 100% of the payment to continue
after the first death.
If Option 1 or 3 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 3, 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.
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NONLIFETIME ANNUITY OPTIONS:
- -OPTION 1--Payments for a Specified Period--payments will continue for a
specified period of time, as provided for under your Contract.
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. For amounts held in the Fixed Plus Account
(if available under the Contract), the annuity must be paid on a fixed basis and
payments may be made for 5-30 years. For amounts held in the Subaccounts, the
Guaranteed Accumulation Account or the Fixed Account, an annuity may be selected
on a fixed or variable basis and payments may be made for 3-30 years. 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.")
The nonlifetime option is not available on a variable basis under a Contract
which provides for immediate Annuity benefits.
We may also offer additional Annuity Options under your Contract from time
to time. The Company expects to offer additional Annuity Options and enhanced
versions of the Annuity Options listed above at some time during 1996. These
additional Annuity Options and enhanced versions of the existing options will
have additional Subaccounts available and will allow transfers between
Subaccounts during the Annuity Period. (Additional Subaccounts and transfer
capability are expected during the second half of 1996.) Such additional or
enhanced options will be made available by an endorsement to the Contract, which
will include the guaranteed annuity payout rates and other terms applicable to
such options. (Depending on which guaranteed payout rates apply to the existing
options, the guaranteed payout rates for the new and enhanced options will be
the same or lower.) Please refer to the Contract, or call the number listed in
the "Inquiries" section of the Prospectus Summary, to determine which options
are available and the terms of such options. It is not expected that these
additional or enhanced options will be made available to those who have already
commenced receiving Annuity Payments.
ANNUITY PAYMENTS
DATE PAYOUTS START. Annuity payments may not extend beyond (a) the life of
the Annuitant, (b) the joint lives of the Annuitant and Plan 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 Plan
Beneficiary.
AMOUNT OF EACH ANNUITY PAYMENT. The amount of each payment depends on your
Account Value, how it is allocated between fixed and variable payouts, and the
Annuity option chosen. No election may be made that would result in the first
Annuity payment of less than $20, or total yearly Annuity payments of less than
$100. If your combined Employer and Employee Account Value on the Annuity Date
is insufficient to elect an option for the minimum amount specified, a lump-sum
payment must be elected.
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
selected (3 1/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity payments will increase thereafter only to the extent that
the net investment rate 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. (See the
Statement of Additional Information for further information on the impact of
selecting a particular assumed net investment rate.)
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks from any amounts
held on a variable basis. Therefore, electing the nonlifetime option on a
variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative charge from amounts
held under the variable options. (See "Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE
ANNUITY PERIOD
If an Annuitant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If Option 1 or Option 3 was elected, Annuity payments will cease on
the death of the Annuitant under Option 1 or the death of the surviving
Annuitant under Option 3.
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If Lifetime Option 2 or Option 4 was elected and the death of the Annuitant
under Option 2, or the surviving Annuitant under Option 4, occurs prior to the
end of the guaranteed minimum payment period, we will pay to the Plan
Beneficiary in a lump sum, unless otherwise requested, the present value of the
guaranteed annuity payments remaining.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments may be paid in a lump-sum
to the Plan Beneficiary (unless otherwise requested), and no deferred sales
charge will be imposed.
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 Plan Beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after proof of death
acceptable to us, and a request for payment are received at our Home Office. The
value of any death benefit proceeds will be determined as of the next Valuation
Date after we receive acceptable proof of death and a request for payment. Under
Options 2 and 4, such value will be reduced by any payments made after the date
of death.
TAX STATUS
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INTRODUCTION
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
The Company makes no guarantee regarding the tax treatment of any Contract or
transaction involving a Contract. The ultimate effect of federal income taxes on
the amounts held under a Contract, on Annuity payments, and on the economic
benefit to the Contract Holder, Participant or Plan Beneficiary may depend upon
the tax status of the individual concerned. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under 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's 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 interpretation 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.
CONTRACTS USED WITH CERTAIN
RETIREMENT PLANS
IN GENERAL. The Contract is designed for use with Section 403(b) plans, and
Section 401(a) and Section 401(k) plans. The tax rules applicable to retirement
plans vary according to the type of plan and the terms and conditions of the
plan.
The Company makes no attempt to provide more than general information about
use of the Contracts with the various types of retirement plans. Participants as
well as Plan 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, in addition to the terms and conditions of the Contracts
issued in connection with such plans. Some retirement plans are subject to
limitations on distribution and other requirements that are not incorporated in
the Contracts. Purchasers are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts satisfy
applicable laws, and should consult their legal counsel and tax adviser
regarding the suitability of the Contract.
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MINIMUM DISTRIBUTION REQUIREMENTS. The Code has required distribution rules
for Section 403(b), 401(a) and 401(k) Plans. Under 403(b) Plans, distributions
of amounts held as of December 31, 1986 must generally begin by the end of the
calendar year in which you attain age 75 (or retire, if later, for governmental
or church plans). However, special rules require that some or all of that
balance be distributed earlier if any distributions are taken in excess of the
minimum required amount. Distributions under 401(a) and 401(k) Plans, and
distributions attributable to contributions under Section 403(b) Plans on or
after January 1, 1987 (including any earnings on the entire Account Value after
that date), must generally begin by April 1 of the calendar year following the
calendar year in which you attain age 70 1/2 or retire, whichever occurs later.
In general, annuity payments must be distributed over your life or the joint
lives of you and your Plan Beneficiary, or over a period not greater than your
life expectancy or the joint life expectancies of you and your Plan Beneficiary.
If you die after the required minimum distribution has commenced,
distributions to your Plan Beneficiary must be made at least as rapidly as under
the method of distribution in effect at the time of your death. However, if the
minimum required distribution is calculated each year based on your single life
expectancy or the joint life expectancies of you and your beneficiary, the
regulations for Code Section 401(a)(9) provide specific rules for calculating
the minimum required distributions at your death. For example, if you have
elected ECO with the calculation based on your single life expectancy, and the
life expectancy is recalculated each year, your recalculated life expectancy
becomes zero in the calendar year following your death and the entire remaining
interest must be distributed to your beneficiary by December 31 of the year
following your death. However, a spousal beneficiary has certain rollover rights
which can only be exercised in the year of your death. The rules are complex and
you should consult your tax adviser before electing the method of calculation to
satisfy the minimum distribution requirements.
If you die before the required minimum distribution has commenced, your
entire interest must be distributed by December 31 of the calendar year
containing the fifth anniversary of the date of your death. Alternatively,
payments may be made over the life of the beneficiary or over a period not
extending beyond the life expectancy of the beneficiary provided the
distribution begins by December 31 of the calendar year following the calendar
year of your death, or December 31 of the calendar year in which you would have
attained age 70 1/2.
If you fail to receive the minimum required distribution for any tax year, a
50% excise tax is imposed on the required amount that was not distributed.
TAXATION OF DISTRIBUTIONS. All distributions will be taxed as they are
received unless you made a rollover contribution of the distribution to another
plan of the same type or to 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 Plan 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 may be provided
the opportunity to elect not to have tax withheld from distributions; however,
certain distributions from 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 separated from service with the
plan sponsor at or after age 55, (e) the distribution amount is rolled over into
another plan of the same type or to an IRA in accordance with the terms of the
Code, or (f) the distribution amount is made in substantially equal periodic
payments (at least annually) over your life or life expectancy or the joint
lives or joint life expectancies of you and your plan beneficiary, provided you
have separated from service with the plan sponsor. In addition, the penalty tax
does not apply for the amount of a distribution equal to unreimbursed medical
expenses incurred by you that qualify for deduction as specified in the Code.
The Code may impose other penalty taxes in other circumstances.
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SECTION 403(B) PLANS. Under Code Section 403(b), contributions made by
nonprofit healthcare organizations and other Section 501(c)(3) tax exempt
organizations to purchase annuity contracts for their employees are generally
excludable from the gross income of the employee.
In order to be excludable from taxable income, total annual contributions
made by you and your employer cannot exceed either of two limits set by the
Code. The first limit, under Section 415, is generally the lesser of 25% of your
includable compensation or $30,000. The second limit, which is the exclusion
allowance under Section 403(b), is usually calculated according to a formula
that takes into account your length of employment and any pretax contributions
to certain other retirement plans. These two limits apply to your contributions
as well as to any contributions made by your employer on your behalf. There is
an additional limit that specifically limits your salary reduction contributions
to generally no more than $9,500 annually (subject to indexing); your own limit
may be higher or lower, depending on certain conditions. In addition Purchase
Payments will be excluded from a Participant's gross income only if the Plan
meets certain nondiscrimination requirements.
Section 403(b)(11) restricts the distribution under Section 403(b) contracts
of: (1) salary reduction contributions made after December 31, 1988; (2)
earnings on those contributions; and (3) earnings during such period on amounts
held as of December 31, 1988. 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 salary
reduction contributions may not be distributed in the case of hardship.
If, pursuant to Revenue Ruling 90-24, the Company agrees to accept, under
any of the Contracts covered by this Prospectus, amounts transferred from a Code
Section 403(b)(7) custodial account, such amounts will be subject to the
withdrawal restrictions set forth in Code Section 403(b)(7)(A)(ii).
Generally, no amounts accumulated under the Contract will be taxable prior
to the time of actual distribution. However, the IRS has stated in published
rulings that a variable contract owner, including participants under Section
403(b) Plans, will be considered the owner of separate account assets if the
contract owner possesses incidents of investment control over the assets. In
these circumstances, income and gains from the separate account assets would be
currently includable in the variable contract owner's gross income. The Treasury
announced that guidance would be issued in the future regarding the extent to
which owners could direct their investments among Subaccounts without being
treated as owners of the underlying assets of the Separate Account. It is
possible that the Treasury's position, when announced, may adversely affect the
tax treatment of existing contracts. The Company therefore reserves the right to
modify the Contract as necessary to attempt to prevent the owner from being
considered the federal tax owner of the assets of the Separate Account.
SECTION 401(A) AND 401(K) PLANS. Section 401(a) and 401(k) permits certain
employers to establish various types of retirement plans for employees, and
permits self-employed individuals to establish various types of retirement plans
for themselves and for their employees. These retirement plans may permit the
purchase of the Contracts to accumulate retirement savings under the plans.
Adverse tax consequences to the Plan, to the Participant or to both may result
if this Contract is assigned or transferred to any individual except to a
Participant as a means to provide benefit payments.
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 employer in accordance with Section 415 of the Code. This limit
is generally the lesser of 25% of your compensation or $30,000. The limit
applies to your contributions as well as any contributions made by your employer
on your behalf. There is an additional limit that specifically limits your
salary reduction contributions under a 401(k) Plan to generally no more than
$9,500 annually (subject to indexing). Your own limits may be higher or lower,
depending on certain conditions. In addition, Purchase Payments will be excluded
from a Participant's gross income only if the Plan meets certain
nondiscrimination requirements.
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MISCELLANEOUS
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DISTRIBUTION
The Company will serve as the Principal 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.
PAYMENT OF COMMISSIONS. 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 an Account. The percentage amount will range from 1%
to 6% of those Purchase Payments. The Company may also pay renewal commissions
and asset-based service fees on Purchase Payments made after the first year. 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 in your enrollment materials. Commissions and sales related expenses
are paid by the Company and are not deducted from Purchase Payments. (See
"Charges and Deductions--Deferred Sales Charge.")
THIRD PARTY COMPENSATION ARRANGEMENTS. 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 entity for certain services in connection with administering the
Contracts. In both these circumstances there may be an understanding that the
Distributor or entity 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.
DELAY OR SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or is not reasonably practicable for
the value of the Subaccount's assets; or (c) during such other periods as the
SEC may by order permit for the protection of investors. The conditions under
which restricted trading or an emergency exists shall be determined by the rules
and regulations of the SEC.
PERFORMANCE REPORTING
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total returns" of the Subaccounts,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
returns." "Standardized average annual total returns" are computed according to
a formula in which a hypothetical investment of $1,000 is applied to the
Subaccount 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 reduction of all recurring charges during
each period (e.g., mortality and expense risk charges, annual maintenance fees,
administrative expense charge (if any) and any applicable deferred sales
charge). "Non-standardized returns" 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 monthly, quarterly, year-to-date and three-year periods.
The Company may also advertise certain ratings, rankings or other
information related to the Company, the Subaccounts or the Funds. Further
details regarding performance reporting and advertising are described in the
Statement of Additional Information.
VOTING RIGHTS
In accordance with the Company's view of present applicable law, it will
vote the shares of each of the Funds
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held by the Separate Account at regular and special meetings of Fund
shareholders in accordance with instructions received from persons having a
voting interest in the Separate Account. Participants and Annuitants have a
fully vested (100%) interest in the value of the Employee Account and also have
a nonforfeitable (vested) right to the value of the Employer Account pursuant to
the terms of, and to the extent of their vested percentage under the Plan.
Therefore, such Participants and Annuitants may instruct the Contract Holder how
to direct the Company to cast the votes for the portion of the Account Value or
valuation reserve attributable to their Accounts. The Company will vote shares
for which it has not received instructions in the same proportion as it votes
shares for which it has received instructions.
Each person having a voting interest in the Separate Account will receive
periodic reports relating to the Fund(s) in which he or she has an interest, as
well as any proxy materials and a form on which to give voting instructions.
Voting instructions will be solicited by written communication at least 14 days
before such meeting. The number of votes to which each person may give direction
will be determined as of the record date set by the Fund.
The number of votes each Contract Holder, Participant or beneficiary, as
applicable, may cast during the Accumulation Period is equal to the portion of
the Account Value 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.
MODIFICATION OF THE CONTRACT
The Company may change the Contract as required by federal or state law. In
addition, the Company may, upon 30 days written notice to the Contract Holder,
make other changes to the Contract that would apply only to individuals who
become Participants under that Contract after the effective date of such
changes. If the Contract Holder does not agree to a change, no new Participants
will be covered under the Contract. Certain changes will require the approval of
appropriate state or federal regulatory authorities.
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Susan E. Bryant, Esq., Counsel to the Company.
CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
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The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:
<TABLE>
<S> <C>
General Information and History
Variable Annuity Account C
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
</TABLE>
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APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
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THE GUARANTEED ACCUMULATION ACCOUNT ("GAA") IS A CREDITED INTEREST OPTION
AVAILABLE DURING THE ACCUMULATION PERIOD UNDER THE CONTRACTS DISCUSSED IN THIS
PROSPECTUS. AMOUNTS ALLOCATED TO LONG-TERM CLASSIFICATIONS OF GAA ARE HELD IN A
NONINSULATED, NONUNITIZED SEPARATE ACCOUNT. AMOUNTS ALLOCATED TO SHORT-TERM
CLASSIFICATIONS OF GAA ARE HELD IN THE COMPANY'S GENERAL ACCOUNT. THIS APPENDIX
IS A SUMMARY OF GAA AND IS NOT INTENDED TO REPLACE THE GAA PROSPECTUS. YOU
SHOULD READ THE ACCOMPANYING GAA PROSPECTUS CAREFULLY BEFORE INVESTING.
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 for one year. This option guarantees the minimum interest
rate specified in the Contract.
During a specified period of time, (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to three
years, and Long-Term GAA has Guaranteed Terms from more than three and up to ten
years.
Purchase Payments must remain in GAA for the full Guaranteed Term to receive
the quoted interest rates. Withdrawals or transfers from a Guaranteed Term
before the end of that Guaranteed Term may be subject to a market value
adjustment ("MVA"). For Contracts issued in New York, no MVA applies upon the
election of the Estate Conservation Option or the Systematic Withdrawal Option.
An MVA reflects the change in the value of the investments 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 other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to a
deferred sales charge, federal tax penalties or mandatory income tax withholding
and a maintenance fee.
By notifying us at least 30 days prior to the Annuity Date, the Contract
Holder may elect a variable annuity on your behalf and have amounts that have
been accumulating under GAA transferred to one or more of the Subaccounts
available during the Annuity Period. 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
Transfers are permitted among Guaranteed Terms. However, amounts applied to
GAA may not be transferred to another Guaranteed Term of GAA, or to any other
Subaccount or Credited Interest Option available under the Contract, during the
deposit period or the 90 days after the close of the deposit period. We will
apply an MVA to transfers made before the end of a Guaranteed Term, unless such
transfer is due to the maturity of the Guaranteed Term.
CONTRACT LOANS
Loans may not be made against amounts held in GAA, although such value is
included in determining the Account Value against which a loan may be made.
REINVESTMENT PRIVILEGE
If amounts are withdrawn from GAA and reinvested, they 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.
- --------------------------------------------------------------------------------
19
<PAGE>
APPENDIX II
FIXED ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED ACCOUNT.
AMOUNTS ALLOCATED TO THE FIXED ACCOUNT ARE HELD IN THE COMPANY'S GENERAL ACCOUNT
THAT SUPPORTS GENERAL 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 THE PROSPECTUS REGARDING
THE FIXED ACCOUNT, MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF SUCH STATEMENTS. DISCLOSURE IN THIS APPENDIX REGARDING THE FIXED
ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
The Fixed Account guarantees the minimum interest rate specified in the
Contract. The Company may credit a higher interest rate from time to time. The
current rate is subject to change at any time, but will never fall below the
guaranteed minimum. 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 the Fixed
Account, the Company assumes the risk of investment gain or loss by guaranteeing
Account Values and promising a minimum interest rate and Annuity Payment.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to six months, or (b) as provided by
federal law.
In addition, if allowed by state law, the Company may pay any Fixed Account
withdrawal value in equal payments, with interest, over a period not to exceed
60 months, when:
(a) The Fixed Account withdrawal value for the Contract or for the total of the
Accounts under the Contract exceeds $250,000 on the day prior to the
withdrawal; and
(b) the sum of the current Fixed Account withdrawal and the total of all Fixed
Account withdrawals from the Contract or for the total of the Accounts under
the Contract within the past 12 calendar months exceeds 20% of the amount in
the Fixed Account on the day prior to the current withdrawal.
Interest, as used above, will not be more than two percentage points below
any rate determined prospectively by the Board of Directors for this class of
Contract. In no event will the interest rate be less than the minimum stated in
the Contract.
Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.
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
options(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.
By notifying us at our Home Office at least 30 days before Annuity payments
begin, the Contract Holder, on your behalf, may elect to have amounts which have
been accumulating under the Fixed Account transferred to one or more of the
Subaccounts available during the Annuity Period to provide variable Annuity
payments.
CONTRACT LOANS
Under 403(b) Plans, loans may be made from Account Values held in the Fixed
Account.
- --------------------------------------------------------------------------------
20
<PAGE>
APPENDIX III
FIXED PLUS ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED PLUS
ACCOUNT. AMOUNTS ALLOCATED TO THE FIXED PLUS ACCOUNT ARE HELD IN THE COMPANY'S
GENERAL ACCOUNT THAT SUPPORTS GENERAL 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 THE PROSPECTUS REGARDING THE FIXED PLUS ACCOUNT, MAY, HOWEVER, BE SUBJECT TO
CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING
TO THE ACCURACY AND COMPLETENESS OF SUCH STATEMENTS. DISCLOSURE IN THIS APPENDIX
REGARDING THE FIXED PLUS ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
The Fixed Plus Account guarantees the minimum Fixed Plus interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The current rate is subject to change at any time, but will never
fall below the guaranteed minimum. 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
the Fixed Plus Account, the Company assumes the risk of investment gain or loss
by guaranteeing Account Values and promising a minimum interest rate and Annuity
Payment. This option is not available in the state of New York.
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 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, loans 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 any of the
Additional Withdrawal Options.
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
six months after the Participant's date of death. Any such surrender or
annuitization must also be made pro rata from all Subaccounts and Credited
Interest Options available under the Contract.
If a full withdrawal is requested, we will pay any amounts held in the Fixed
Plus Account, with interest, in five annual payments equal to:
1. One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made during the prior 12 months;
2. One-fourth of the remaining Fixed Plus Account Value 12 months later;
3. One-third of the remaining Fixed Plus Account Value 12 months later;
4. One-half of the remaining Fixed Plus Account Value 12 months later; and
5. The balance of the Fixed Plus Account Value 12 months later.
- --------------------------------------------------------------------------------
21
<PAGE>
Once we receive a request for a full withdrawal, no further withdrawals,
loans 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 and request for
payment is received within 6 months after the Participant's date of death;
(b) the election of an Annuity option;
(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 we receive a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made during the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of an Additional
Withdrawal Option. The 20% limit on transfers will be waived when the value in
the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before the Annuity Date,
you may elect to have amounts which have been accumulating under the Fixed Plus
Account transferred to one or more of the Subaccounts available during the
Annuity Period to provide lifetime variable Annuity Payments.
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.
CONTRACT LOANS
If permitted under the Contract, loans may be made from Account Values held
in the Fixed Plus Account. See the loan agreement for a description of the
amount available and the consequences upon loan default if more than 20% of the
Fixed Plus Account Value is used for a loan.
- --------------------------------------------------------------------------------
22
<PAGE>
APPENDIX IV
EMPLOYEE APPOINTMENT OF EMPLOYER
AS AGENT UNDER AN ANNUITY CONTRACT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
My employer has adopted a Retirement Plan under Internal Revenue Code
Section 403(b) ("Plan") and has purchased an Aetna Life Insurance and Annuity
Company ("Company") group variable annuity contract ("Contract") as the funding
vehicle. Contributions under this Plan will be made by me through salary
reduction to an Employee Account, and by my employer to an Employer Account.
By electing to participate in my employer's Plan, I voluntarily appoint my
employer, who is the Contract Holder, as my agent for the purposes of all
transactions under the Contract in accordance with the terms of the Plan. The
Company is not a party to the Plan and does not interpret the Plan provisions.
As a Participant in the Plan, I understand and agree to the following terms
and conditions:
- - I own the value of my Employee Account subject to the restrictions of Section
403(b) and the terms of the Plan. Subject to the terms of the vesting schedule
in the Plan and the restrictions of Section 403(b), I have ownership in the
value of my Employer Account.
- - I understand that the Company will process transactions only with my
employer's written direction to the Company. I agree to be bound by my
employer's interpretation of the Plan provisions and its written direction to
the Company.
- - My employer may permit me to make investment selections under the Employee
Account and/or the Employer Account directly with the Company under the terms
of the Contract. Without my employer's written permission, I will be unable to
make any investment selections under the Contract.
- - On my behalf, my employer may request a loan in accordance with the terms of
the Contract and the provisions of the Plan. The Company will make payment of
the loan amount directly to me. I will be responsible for making repayments
directly to the Company in a timely manner.
- - In the event of my death, my employer is the named beneficiary under the terms
of the Contract. I have the right to name a personal beneficiary as determined
under the terms of the Plan and file that beneficiary election with my
employer. It is my employer's responsibility to direct the Company to properly
pay any death benefits.
- --------------------------------------------------------------------------------
23
<PAGE>
FOR MASTER APPLICATIONS ONLY
I HEREBY ACKNOWLEDGE RECEIPT OF AN ACCOUNT C "RETIREMENT PLUS -- GROUP
DEFERRED VARIABLE ANNUITY" PROSPECTUS DATED MAY 1, 1996, AS WELL AS ALL CURRENT
PROSPECTUSES PERTAINING TO THE VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER THE
CONTRACTS.
- ---- PLEASE SEND AN ACCOUNT C STATEMENT OF ADDITIONAL INFORMATION (FORM NO.
75986(S)-2) DATED MAY 1, 1996.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
75986-2 (5/96)
- --------------------------------------------------------------------------------
<PAGE>
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996
AetnaPlus Contracts and Multiple Option Contracts
Group Variable Annuity Contracts Available under Section 403(b) and 401(a)
RETIREMENT PLUS
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account C (the
"Separate Account") dated May 1, 1996.
A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-525-4225
Read the prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the prospectus.
TABLE OF CONTENTS
Page
General Information and History. . . . . . . . . . . . . . . . . . . . 2
Variable Annuity Account C . . . . . . . . . . . . . . . . . . . . . . 2
Offering and Purchase of Contracts . . . . . . . . . . . . . . . . . . 3
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Average Annual Total Return Quotations . . . . . . . . . . . . . . . 4
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Sales Material and Advertising . . . . . . . . . . . . . . . . . . . . 12
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 12
Financial Statements of the Separate Account . . . . . . . . . . . . . S-1
Financial Statements of Aetna Life Insurance and Annuity Company . . . F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1995, the Company had
assets of $27.1 billion (subject to $25.5 billion of customer and other
liabilities, $1.6 billion of shareholder equity) which includes $11 billion in
assets held in the Company's separate accounts. The Company had $22 billion in
assets under management, including $8 billion in its mutual funds. As of
December 31, 1994, it ranked among the top 2% of all U.S. life insurance
companies by size. The Company is a wholly owned subsidiary of Aetna Retirement
Holdings, Inc., which is in turn a wholly owned subsidiary of Aetna Retirement
Services, Inc. and an indirect wholly owned subsidiary of Aetna Life and
Casualty Company. The Company is engaged in the business of issuing life
insurance policies and annuity contracts in all states of the United States.
The Company's Home Office is located at 151 Farmington Avenue, Hartford,
Connecticut 06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
Other than the mortality and expense risk charges and administrative expense
charge described in the prospectus, all expenses incurred in the operations of
the Separate Account are borne by the Company. (See "Charges and Deductions" in
the prospectus.) The Company receives reimbursement for certain administrative
costs from some unaffiliated sponsors of the Funds used as funding options under
the Contract. These fees generally range up to 0.25%.
The assets of the Separate Account are held by the Company. The Separate
Account has no custodian. However, the Funds in whose shares the assets of the
Separate Account are invested each have custodians, as discussed in their
respective prospectuses.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. The assets of the Separate Account will be invested
exclusively in shares of the Funds described in the Prospectus. Purchase
Payments made under the Contract may be allocated to one or more of the
Subaccounts. The Company may make additions to or deletions from available
investment options as permitted by law. The availability of the Funds is
subject to applicable regulatory authorization. Not all Funds are available in
all jurisdictions or under all Plans. The Funds currently available under the
Contract are as follows:
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Aetna Variable Fund Fidelity VIP 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 VIP II Contrafund Portfolio Scudder International Portfolio Class A Shares
Fidelity VIP Equity-Income Portfolio TCI Growth
Fidelity VIP Growth Portfolio
</TABLE>
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, are contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through
life insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is continuous.
A description of the manner in which Contracts are purchased may be found in the
prospectus under the sections titled "Purchase" and "Contract Valuation."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
Prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as the "non-standardized total
returns," both of which are described below.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the various Subaccounts under the Contract, and then
related to the ending redeemable values over one, five and ten year periods (or
fractional periods thereof). The standardized figures reflect the deduction of
all recurring charges during each period (e.g., mortality and expense risk
charges, maintenance fees, administrative expense charges, and deferred sales
charges). These charges will be deducted on a pro rata basis in the case of
fractional periods. The maintenance fee is converted to a percentage of assets
based on the average account size under the Contracts described in the
Prospectus.
The non-standardized figures will be calculated in a similar manner, except that
they will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance shown if
3
<PAGE>
reflected in these calculations). The non-standardized figures may also include
monthly, quarterly, year-to-date and three year periods.
If a Fund was in existence prior to the date it became available under the
Contract, standardized and non-standardized total returns may include periods
prior to such date. These figures are calculated by adjusting the actual
returns of the Fund to reflect the charges that would have been assessed under
the Contract had that Fund been available under the Contract during that period.
Investment results of the Subaccounts will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will perform
in any future period. Additionally, the Account Value upon redemption may be
more or less than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED
There are two sets of total return quotations shown below: one for AetnaPlus
Contracts and one for Multiple Option Contracts (as identified on the cover of
your Prospectus). The contract features and charges under these types of
contracts are identical; however, they are administered on two different
administrative systems. Due to differences in the way the two systems
administered payments prior to mid-1994, performance for the Subaccounts under
the two systems for those periods differs.
Additionally, each set of tables shown below represents the variations in
contract payment type and in the maintenance fees assessed under different
plans. Table A reflects the average annual standardized and non-standardized
total return quotation figures for the periods ended December 31, 1995 for the
Subaccounts under Single Payment Accounts issued by the Company. Tables B and C
reflect the average annual standardized and non-standardized total return
quotation figures for the periods ended December 31, 1995 for the Subaccounts
under Installment Payment Accounts with a $15 annual maintenance fee and a $7.50
annual maintenance fee, respectively. In both sets of tables, for those
Subaccounts where results are not available for the full calendar period
indicated, the percentage shown is an average annual return since inception
(denoted with an *).
AETNA PLUS CONTRACTS
TABLE A
<TABLE>
<CAPTION>
SINGLE PAYMENT ACCOUNT: FUND
($0 MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 24.08% 11.20% 12.30% 30.61% 10.43% 12.11% 12.30% 04/30/75
Aetna Income Shares 10.94% 7.62% 8.52% 16.78% 6.32% 8.51% 8.52% 06/01/78
Aetna Variable Encore Fund (0.50%) 2.56% 4.92% 4.74% 3.14% 3.40% 4.92% 09/01/75
Aetna Investment Advisers Fund, Inc. 19.37% 9.60% 8.88%* 25.65% 10.30% 10.50% 9.39%* 06/23/89
Aetna Ascent Variable Portfolio 4.33%* n/a n/a 9.82%* n/a n/a n/a 07/03/95
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SINGLE PAYMENT ACCOUNT: FUND
($0 MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Crossroads Variable Portfolio 3.22%* n/a n/a 8.66%* n/a n/a n/a 07/03/95
Aetna Legacy Variable Portfolio 2.21%* n/a n/a 7.59%* n/a n/a n/a 07/03/95
Alger American Growth Portfolio 27.95% 19.24% 17.44%* 34.68% 17.73% 20.22% 17.96%* 01/08/89
Alger American Small Cap Portfolio 35.39% 17.95% 20.62%* 42.52% 14.33% 18.92% 20.96%* 09/21/88
Calvert Responsibly Invested
Balanced Portfolio 21.76% 8.97% 8.72%* 28.17% 9.59% 9.86% 8.72%* 09/30/86
Fidelity VIP II Contrafund Portfolio 31.01%* n/a n/a 37.91%* n/a n/a n/a 01/03/95
Fidelity VIP Equity-Income Portfolio 26.75% 18.84% 11.99%* 33.43% 18.12% 19.82% 11.99%* 10/22/86
Fidelity VIP Growth Portfolio 27.01% 18.31% 13.55%* 33.69% 15.88% 19.28% 13.55%* 11/07/86
Fidelity VIP Overseas Portfolio 2.91% 5.91% 5.90%* 8.32% 13.86% 6.78% 6.02%* 02/13/87
Franklin Government Securities Trust 10.43% 6.50% 7.37%* 16.24% 5.53% 7.37% 7.87%* 05/30/89
Janus Aspen Aggressive Growth Portfolio 19.61% 23.24%* n/a 25.91% 26.02%* n/a n/a 9/13/93
Janus Aspen Balanced Portfolio 17.08% 10.02%* n/a 23.24% 12.50%* n/a n/a 09/13/93
Janus Aspen Flexible Income Portfolio 16.21% 5.92%* n/a 22.33% 8.31%* n/a n/a 09/13/93
Janus Aspen Growth Portfolio 22.14% 11.27%* n/a 28.56% 13.78%* n/a n/a 09/13/93
Janus Aspen Short-Term Bond Portfolio 2.77% 1.02%* n/a 8.18% 3.30%* n/a n/a 09/13/93
Janus Aspen Worldwide Growth Portfolio 19.40% 16.51%* n/a 25.69% 19.13%* n/a n/a 09/13/93
Lexington Natural Resources Trust 9.65% 16.66%* n/a 15.42% 6.03% 18.09%* n/a 05/31/89
Neuberger & Berman Growth Portfolio 23.59% 11.91% 11.04% 30.10% 9.71% 12.82% 11.04% 12/31/85
Scudder International Portfolio
Class A Shares 4.25% 8.05% 7.85%* 9.74% 13.28% 8.93% 7.98%* 04/30/87
TCI Growth 23.00% 13.38% 11.81%* 29.47% 12.57% 14.31% 11.95%* 11/20/87
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These
figures represent historical performance and should not be considered a
projection of future performance.
AETNA PLUS CONTRACTS
TABLE B
<TABLE>
<CAPTION>
INSTALLMENT PAYMENT ACCOUNT: FUND
($15 MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 23.97% 10.86% 12.20% 30.50% 10.32% 12.00% 12.20% 04/30/75
Aetna Income Shares 10.83% 7.29% 8.42% 16.67% 6.21% 8.40% 8.42% 06/01/78
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
INSTALLMENT PAYMENT ACCOUNT: FUND
($15 MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Encore Fund (0.61%) 2.24% 4.81% 4.63% 3.04% 3.29% 4.81% 09/01/75
Aetna Investment Advisers Fund, Inc. 19.26% 9.27% 8.42%* 25.55% 10.19% 10.40% 9.28%* 06/23/89
Aetna Ascent Variable Portfolio 4.22%* n/a n/a 9.71%* n/a n/a n/a 07/03/95
Aetna Crossroads Variable Portfolio 3.12%* n/a n/a 8.55%* n/a n/a n/a 07/03/95
Aetna Legacy Variable Portfolio 2.11%* n/a n/a 7.49%* n/a n/a n/a 07/03/95
Alger American Growth Portfolio 27.84% 18.88% 16.99%* 34.58% 17.63% 20.11% 17.85%* 01/08/89
Alger American Small Cap Portfolio 35.29% 17.59% 20.00%* 42.41% 14.22% 18.81% 20.85%* 09/21/88
Calvert Responsibly Invested
Balanced Portfolio 21.65% 8.63% 8.02%* 28.06% 9.48% 9.75% 8.62%* 09/30/86
Fidelity VIP II Contrafund Portfolio 30.91%* n/a n/a 37.80%* n/a n/a n/a 01/03/95
Fidelity VIP Equity-Income Portfolio 26.65% 18.49% 11.26%* 33.32% 18.01% 19.71% 11.88%* 10/22/86
Fidelity VIP Growth Portfolio 26.90% 17.95% 12.81%* 33.59% 15.78% 19.17% 13.44%* 11/07/86
Fidelity VIP Overseas Portfolio 2.80% 5.58% 5.30%* 8.22% 13.75% 6.67% 5.91%* 02/13/87
Franklin Government Securities Trust 10.32% 6.17% 6.93%* 16.14% 5.42% 7.26% 7.76%* 05/30/89
Janus Aspen Aggressive Growth Portfolio 19.50% 23.13%* n/a 25.80% 25.91%* n/a n/a 09/13/93
Janus Aspen Balanced Portfolio 16.97% 9.91%* n/a 23.14% 12.39%* n/a n/a 09/13/93
Janus Aspen Flexible Income Portfolio 16.10% 5.81%* n/a 22.22% 8.20%* n/a n/a 09/13/93
Janus Aspen Growth Portfolio 22.03% 11.16%* n/a 28.46% 13.67%* n/a n/a 09/13/93
Janus Aspen Short-Term Bond Portfolio 2.66% 0.91%* n/a 8.07% 3.19%* n/a n/a 09/13/93
Janus Aspen Worldwide Growth Portfolio 19.30% 16.40%* n/a 25.58% 19.03%* n/a n/a 09/13/93
Lexington Natural Resources Trust 9.54% 16.55%* n/a 15.31% 5.92% 17.98%* n/a 05/31/89
Neuberger & Berman Growth Portfolio 23.49% 11.56% 10.94% 29.99% 9.60% 12.72% 10.94% 12/31/85
Scudder International Portfolio
Class A Shares 4.14% 7.72% 7.23%* 9.63% 13.17% 8.83% 7.87%* 04/30/87
TCI Growth 22.89% 13.03% 11.14%* 29.37% 12.46% 14.20% 11.85%* 11/20/87
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These
figures represent historical performance and should not be considered a
projection of future performance.
6
<PAGE>
AETNA PLUS CONTRACTS
TABLE C
<TABLE>
<CAPTION>
INSTALLMENT PAYMENT ACCOUNT: FUND
($7.50 MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 24.03% 10.91% 12.25% 30.56% 10.37% 12.06% 12.25% 04/30/75
Aetna Income Shares 10.89% 7.34% 8.47% 16.72% 6.26% 8.45% 8.47% 06/01/78
Aetna Variable Encore Fund (0.56%) 2.29% 4.87% 4.68% 3.09% 3.35% 4.87% 09/01/75
Aetna Investment Advisers Fund, Inc. 19.32% 9.32% 8.48%* 25.60% 10.25% 10.45% 9.33%* 06/23/89
Aetna Ascent Variable Portfolio 4.28%* n/a n/a 9.77%* n/a n/a n/a 07/03/95
Aetna Crossroads Variable Portfolio 3.17%* n/a n/a 8.60%* n/a n/a n/a 07/03/95
Aetna Legacy Variable Portfolio 2.16%* n/a n/a 7.54%* n/a n/a n/a 07/03/95
Alger American Growth Portfolio 27.90% 18.94% 17.04%* 34.63% 17.68% 20.17% 17.90%* 01/08/89
Alger American Small Cap Portfolio 35.34% 17.65% 20.06%* 42.47% 14.28% 18.86% 20.91%* 09/21/88
Calvert Responsibly Invested
Balanced Portfolio 21.71% 8.69% 8.07%* 28.12% 9.53% 9.81% 8.67%* 09/30/86
Fidelity VIP II Contrafund Portfolio 30.96%* n/a n/a 37.86%* n/a n/a n/a 01/03/95
Fidelity VIP Equity-Income Portfolio 26.70% 18.54% 11.31%* 33.37% 18.07% 19.77% 11.94%* 10/22/86
Fidelity VIP Growth Portfolio 26.96% 18.01% 12.86%* 33.64% 15.83% 19.23% 13.50%* 11/07/86
Fidelity VIP Overseas Portfolio 2.85% 5.64% 5.35%* 8.27% 13.81% 6.73% 5.96%* 02/13/87
Franklin Government Securities Trust 10.38% 6.22% 6.98%* 16.19% 5.48% 7.32% 7.82%* 05/30/89
Janus Aspen Aggressive Growth Portfolio 19.56% 23.18%* n/a 25.85% 25.96%* n/a n/a 09/13/93
Janus Aspen Balanced Portfolio 17.03% 9.96%* n/a 23.19% 12.45%* n/a n/a 09/13/93
Janus Aspen Flexible Income Portfolio 16.16% 5.86%* n/a 22.27% 8.25%* n/a n/a 09/13/93
Janus Aspen Growth Portfolio 22.08% 11.21%* n/a 28.51% 13.72%* n/a n/a 09/13/93
Janus Aspen Short-Term Bond Portfolio 2.72% 0.97%* n/a 8.12% 3.24%* n/a n/a 09/13/93
Janus Aspen Worldwide Growth Portfolio 19.35% 16.45%* n/a 25.64% 19.08%* n/a n/a 09/13/93
Lexington Natural Resources Trust 9.60% 16.61%* n/a 15.37% 5.98% 18.04%* n/a 05/31/89
Neuberger & Berman Growth Portfolio 23.54% 11.62% 10.99% 30.04% 9.66% 12.77% 10.99% 12/31/85
Scudder International Portfolio
Class A Shares 4.20% 7.77% 7.29%* 9.68% 13.23% 8.88% 7.92%* 04/30/87
TCI Growth 22.95% 13.09% 11.19%* 29.42% 12.52% 14.25% 11.90%* 11/20/87
</TABLE>
7
<PAGE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These
figures represent historical performance and should not be considered a
projection of future performance.
MULTIPLE OPTION CONTRACTS
TABLE A
<TABLE>
<CAPTION>
SINGLE PAYMENT ACCOUNT: FUND
($0 MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 24.08% 10.97% 12.30% 30.61% 10.43% 12.11% 12.30% 04/30/75
Aetna Income Shares 10.94% 7.40% 8.52% 16.78% 6.32% 8.51% 8.52% 06/01/78
Aetna Variable Encore Fund (0.50%) 2.35% 4.92% 4.74% 3.14% 3.40% 4.92% 09/01/75
Aetna Investment Advisers Fund, Inc. 19.37% 9.38% 8.53%* 25.65% 10.33% 10.50% 9.39%* 06/23/89
Aetna Ascent Variable Portfolio 4.33%* n/a n/a 9.82%* n/a n/a n/a 07/03/95
Aetna Crossroads Variable Portfolio 3.22%* n/a n/a 8.66%* n/a n/a n/a 07/03/95
Aetna Legacy Variable Portfolio 2.21%* n/a n/a 7.59%* n/a n/a n/a 07/03/95
Alger American Growth Portfolio 28.02% 19.01% 17.10%* 34.76% 17.76% 20.23% 17.97%* 01/08/89
Alger American Small Cap Portfolio 35.40% 17.89% 20.24%* 42.53% 14.64% 19.11% 21.09%* 09/21/88
Calvert Responsibly Invested
Balanced Portfolio 21.90% 8.71% 8.11%* 28.31% 9.36% 9.83% 8.71%* 09/30/86
Fidelity VIP II Contrafund Portfolio 31.05%* n/a n/a 37.94%* n/a n/a n/a 01/03/95
Fidelity VIP Equity-Income Portfolio 26.87% 18.60% 11.37%* 33.55% 18.13% 19.82% 11.99%* 10/22/86
Fidelity VIP Growth Portfolio 27.02% 18.06% 12.92%* 33.70% 15.89% 19.28% 13.55%* 11/07/86
Fidelity VIP Overseas Portfolio 2.90% 5.69% 5.41%* 8.31% 13.86% 6.78% 6.02%* 02/13/87
Franklin Government Securities Trust 10.43% 6.30% 7.05%* 16.24% 5.49% 7.40% 7.89%* 05/30/89
Janus Aspen Aggressive Growth Portfolio 19.62% 23.24%* n/a 25.91% 26.02%* n/a n/a 09/13/93
Janus Aspen Balanced Portfolio 17.05% 10.01%* n/a 23.22% 12.49%* n/a n/a 09/13/93
Janus Aspen Flexible Income Portfolio 16.22% 5.92%* n/a 22.33% 8.31%* n/a n/a 09/13/93
Janus Aspen Growth Portfolio 21.78% 11.13%* n/a 28.19% 13.63%* n/a n/a 09/13/93
Janus Aspen Short-Term Bond Portfolio 2.49% 0.90%* n/a 7.89% 3.18%* n/a n/a 09/13/93
Janus Aspen Worldwide Growth Portfolio 19.54% 16.56%* n/a 25.83% 19.19%* n/a n/a 09/13/93
Lexington Natural Resources Trust 9.64% 3.76%* n/a 15.41% 5.72% 5.03%* n/a 05/31/89
Neuberger & Berman Growth Portfolio 23.59% 11.36% 10.77% 30.09% 8.80% 12.28% 10.77% 12/31/85
Scudder International Portfolio
Class A Shares 4.25% 7.92% 7.39%* 9.74% 13.52% 9.03% 8.03%* 04/30/87
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SINGLE PAYMENT ACCOUNT: FUND
($0 MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TCI Growth 22.99% 12.33% 10.75%* 29.47% 11.28% 13.49% 11.46%* 11/20/87
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These
figures represent historical performance and should not be considered a
projection of future performance.
MULTIPLE OPTION CONTRACTS
TABLE B
<TABLE>
<CAPTION>
INSTALLMENT PAYMENT ACCOUNT: FUND
($15 ANNUAL MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 23.97% 10.86% 12.20% 30.50% 10.32% 12.00% 12.20% 04/30/75
Aetna Income Shares 10.83% 7.29% 8.42% 16.67% 6.21% 8.40% 8.42% 06/01/78
Aetna Variable Encore Fund (0.61%) 2.24% 4.81% 4.63% 3.04% 3.29% 4.81% 09/01/75
Aetna Investment Advisers Fund, Inc. 19.26% 9.27% 8.42%* 25.55% 10.19% 10.40% 9.28%* 06/23/89
Aetna Ascent Variable Portfolio 4.22%* n/a n/a 9.71%* n/a n/a n/a 07/03/95
Aetna Crossroads Variable Portfolio 3.12%* n/a n/a 8.55%* n/a n/a n/a 07/03/95
Aetna Legacy Variable Portfolio 2.11%* n/a n/a 7.49%* n/a n/a n/a 07/03/95
Alger American Growth Portfolio 27.91% 18.90% 17.00%* 34.65% 17.65% 20.13% 17.86%* 01/08/89
Alger American Small Cap Portfolio 35.29% 17.78% 20.13%* 42.42% 14.53% 19.00% 20.99%* 09/21/88
Calvert Responsibly Invested
Balanced Portfolio 21.79% 8.60% 8.00%* 28.20% 9.25% 9.72% 8.60%* 09/30/86
Fidelity VIP II Contrafund Portfolio 30.94%* n/a n/a 37.84%* n/a n/a n/a 01/03/95
Fidelity VIP Equity-Income Portfolio 26.76% 18.49% 11.26%* 33.44% 18.02% 19.72% 11.89%* 10/22/86
Fidelity VIP Growth Portfolio 26.91% 17.96% 12.81%* 33.59% 15.78% 19.17% 13.44%* 11/07/86
Fidelity VIP Overseas Portfolio 2.79% 5.58% 5.30%* 8.21% 13.75% 6.67% 5.91%* 02/13/87
Franklin Government Securities Trust 10.32% 6.19% 6.95%* 16.14% 5.39% 7.29% 7.78%* 05/30/89
Janus Aspen Aggressive Growth Portfolio 19.51% 23.13%* n/a 25.81% 25.92%* n/a n/a 09/13/93
Janus Aspen Balanced Portfolio 16.95% 9.90%* n/a 23.14% 12.39%* n/a n/a 09/13/93
Janus Aspen Flexible Income Portfolio 16.11% 5.81%* n/a 22.22% 8.20%* n/a n/a 09/13/93
Janus Aspen Growth Portfolio 21.68% 11.02%* n/a 28.09% 13.53%* n/a n/a 09/13/93
Janus Aspen Short-Term Bond Portfolio 2.39% 0.79%* n/a 7.78% 3.07%* n/a n/a 09/13/93
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
INSTALLMENT PAYMENT ACCOUNT: FUND
($15 ANNUAL MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Janus Aspen Worldwide Growth Portfolio 19.43% 16.46%* n/a 25.72% 19.09%* n/a n/a 09/13/93
Lexington Natural Resources Trust 9.53% 3.65%* n/a 15.30% 5.61% 4.92%* n/a 05/31/89
Neuberger & Berman Growth Portfolio 23.48% 11.02% 10.67% 29.99% 8.69% 12.17% 10.67% 12/31/85
Scudder International Portfolio
Class A Shares 4.14% 7.81% 7.29%* 9.63% 13.41% 8.93% 7.92%* 04/30/87
TCI Growth 22.89% 12.22% 10.65%* 29.36% 11.18% 13.38% 11.35%* 11/20/87
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These
figures represent historical performance and should not be considered a
projection of future performance.
MULTIPLE OPTION CONTRACTS
TABLE C
<TABLE>
<CAPTION>
INSTALLMENT PAYMENT ACCOUNT: FUND
($7.50 ANNUAL MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 24.03% 10.91% 12.25% 30.56% 10.38% 12.06% 12.25% 04/30/75
Aetna Income Shares 10.89% 7.34% 8.47% 16.72% 6.26% 8.45% 8.48% 06/01/78
Aetna Variable Encore Fund (0.56%) 2.29% 4.87% 4.68% 3.09% 3.35% 8.47% 09/01/75
Aetna Investment Advisers Fund, Inc. 19.32% 9.32% 8.48%* 25.60% 10.25% 10.45% 9.33%* 06/23/89
Aetna Ascent Variable Portfolio 4.28%* n/a n/a 9.77%* n/a n/a n/a 07/03/95
Aetna Crossroads Variable Portfolio 3.17%* n/a n/a 8.60%* n/a n/a n/a 07/03/95
Aetna Legacy Variable Portfolio 2.16%* n/a n/a 7.54%* n/a n/a n/a 07/03/95
Alger American Growth Portfolio 27.97% 18.95% 17.05%* 34.70% 17.70% 20.18% 17.91%* 01/08/89
Alger American Small Cap Portfolio 35.35% 17.84% 20.19%* 42.47% 14.58% 19.05% 21.04%* 09/21/88
Calvert Responsibly Invested
Balanced Portfolio 21.84% 8.66% 8.06%* 28.26% 9.31% 9.78% 8.65%* 09/30/86
Fidelity VIP II Contrafund Portfolio 30.99%* n/a n/a 37.89%* n/a n/a n/a 01/03/95
Fidelity VIP Equity-Income Portfolio 26.82% 18.55% 11.32%* 33.50% 18.08% 19.77% 11.94%* 10/22/86
Fidelity VIP Growth Portfolio 26.96% 18.01% 12.86%* 33.65% 15.83% 19.23% 13.50%* 11/07/86
Fidelity VIP Overseas Portfolio 2.85% 5.63% 5.35%* 8.26% 13.81% 6.72% 5.96%* 02/13/87
Franklin Government Securities Trust 10.38% 6.25% 7.00%* 16.19% 5.44% 7.34% 7.84%* 05/30/89
Janus Aspen Aggressive Growth Portfolio 19.57% 23.19%* n/a 25.86% 25.97%* n/a n/a 09/13/93
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
INSTALLMENT PAYMENT ACCOUNT: FUND
($7.50 ANNUAL MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- ------------------------------ --------------------------- ------------------------------------- -----------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------ --------------------------- ------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Janus Aspen Balanced Portfolio 17.00% 9.95%* n/a 23.16% 12.44%* n/a n/a 09/13/93
Janus Aspen Flexible Income Portfolio 16.16% 5.87%* n/a 22.28% 8.26%* n/a n/a 09/13/93
Janus Aspen Growth Portfolio 21.73% 11.07%* n/a 28.14% 13.58%* n/a n/a 09/13/93
Janus Aspen Short-Term Bond Portfolio 2.44% 0.85%* n/a 7.84% 3.12%* n/a n/a 09/13/93
Janus Aspen Worldwide Growth Portfolio 19.49% 16.51%* n/a 25.78% 19.14%* n/a n/a 09/13/93
Lexington Natural Resources Trust 9.59% 3.71%* n/a 15.36% 5.67% 4.98%* n/a 05/31/89
Neuberger & Berman Growth Portfolio 23.54% 11.08% 10.72% 30.04% 8.74% 12.22% 10.72% 12/31/85
Scudder International Portfolio
Class A Shares 4.20% 7.87% 7.34%* 9.68% 13.47% 8.98% 7.98%* 04/30/87
TCI Growth 22.94% 12.27% 10.70%* 29.41% 11.23% 13.43% 11.40%* 11/20/87
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These
figures represent historical performance and should not be considered a
projection of future performance.
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Date before the first Annuity
payment is due. Such value (less any applicable premium tax) is applied to
provide an Annuity in accordance with the Annuity and investment options
elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first Annuity payment for each $1,000 of value applied.
Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a
higher first payment, but Annuity payments will increase thereafter only to the
extent that the net investment rate increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% assumed rate causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b) where (a)
is the amount of the first Annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Date to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Subaccount(s) (with a ten Valuation Date lag which gives the Company
time to process Annuity payments) and a mathematical adjustment which offsets
the assumed net investment rate of 3.5% or 5% per annum.
11
<PAGE>
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Account and that the value of
an Accumulation Unit for the tenth Valuation Date prior to retirement was
$13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Date on which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be
20.414. The value of this number of Annuity Units will be paid in each
subsequent month.
If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the
assumed net investment rate of 3.5% per annum built into the number of
Annuity Units determined above) produces a result of 1.0014057. This is then
multiplied by the Annuity Unit value for the prior Valuation Date (assume
such value to be $13.504376) to produce an Annuity Unit value of $13.523359
for the Valuation Date on which the second payment is due.
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor
to neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature
that explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable
annuity contracts and other types of savings or investment products,
including, but not limited to, personal savings accounts and certificates of
deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the
Subaccount being compared.
We may publish in advertisements and reports, the ratings and other
information assigned to us by one or more independent rating organizations
such as A.M. Best Company, Duff & Phelps, Standard & Poor's Corporation and
Moody's Investors Services, Inc. The purpose of the ratings is to reflect
our financial strength and/or claims-paying ability. We may also quote
ranking services such as Morningstar's Variable Annuity/Life Performance
Report and Lipper's Variable Insurance Products Performance Analysis Service
12
<PAGE>
(VIPPAS), which rank variable annuity or life Subaccounts or their underlying
funds by performance and/or investment objective. From time to time, we will
quote articles from newspapers and magazines or other publications or
reports, including, but not limited to The Wall Street Journal, Money
magazine, USA Today and The VARDS Report.
The Company may provide in advertising, sales literature, periodic
publications or other materials information on various topics of interest to
current and prospective Contract Holders or Participants. These topics may
include the relationship between sectors of the economy and the economy as a
whole and its effect on various securities markets, investment strategies and
techniques (such as value investing, market timing, dollar cost averaging,
asset allocation, constant ratio transfer and account rebalancing), the
advantages and disadvantages of investing in tax-deferred and taxable
investments, customer profiles and hypothetical purchase and investment
scenarios, financial management and tax and retirement planning, and
investment alternatives to certificates of deposit and other financial
instruments, including comparison between the Contracts and the
characteristics of and market for such financial instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are
the independent auditors for the Separate Account and for the Company. The
services provided to the Separate Account include primarily the examination
of the Separate Account's financial statements and the review of filings made
with the SEC.
13
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
INDEX
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . S-2
Statement of Assets and Liabilities. . . . . . . . . . S-3
Statement of Operations. . . . . . . . . . . . . . . . S-8
Statements of Changes in Net Assets. . . . . . . . . . S-9
Notes to Financial Statements. . . . . . . . . . . . . S-10
Consolidated Financial Information . . . . . . . . . . S-12
S-1
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contract Owners of Variable Annuity Account C:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Annuity Account C (the "Account")
as of December 31, 1995, and the related statement of operations for the year
then ended, statements of changes in net assets for each of the years in the
two-year period then ended and condensed financial information for the year
ended December 31, 1995. These financial statements and condensed financial
information are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
condensed financial information are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence
with the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of the Aetna Life Insurance and Annuity Company Variable Annuity
Account C as of December 31, 1995, the results of its operations for the year
then ended, changes in its net assets for each of the years in the two-year
period then ended and condensed financial information for the year ended
December 31, 1995 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 16, 1996
S-2
<PAGE>
VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES - December 31, 1995
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 135,944,293 shares at $29.06 per share (cost $3,682,373,523).................... $3,949,941,096
Aetna Income Shares; 29,688,857 shares at $13.00 per share (cost $382,776,733)....................... 386,007,595
Aetna Variable Encore Fund; 17,318,377 shares at $13.30 per share (cost $221,087,268) ............... 230,291,686
Aetna Investment Advisers Fund, Inc.; 49,855,715 shares at $14.50 per share
(cost $600,395,092) ............................................................................... 723,017,695
Aetna GET Fund, Series B; 5,897,397 shares at $12.40 per share (cost $59,712,454).................... 73,136,258
Aetna Ascent Variable Portfolio; 454,714 shares at $10.80 per share (cost $4,803,331)................ 4,908,736
Aetna Crossroads Variable Portfolio; 341,591 shares at $10.74 per share (cost $3,599,790)............ 3,668,757
Aetna Legacy Variable Portfolio; 180,468 shares at $10.64 per share (cost $1,883,466)................ 1,919,680
Alger American Funds:
Alger American Growth Portfolio; 1,234,082 shares at $31.16 per share (cost
$38,739,937)....................................................................................... 38,454,000
Alger American Small Capitalization Portfolio; 6,121,453 shares at $39.41 per share
(cost $203,207,523)................................................................................ 241,246,447
Calvert Responsibly Invested Balanced Portfolio; 16,846,014 shares at $1.70 per share
(cost $26,512,853)................................................................................ 28,688,761
Fidelity Investments Variable Insurance Products Funds:
Equity-Income Portfolio; 1,973,219 shares at $19.27 per share (cost $35,264,252)................... 38,023,939
Growth Portfolio; 949,237 shares at $29.20 per share (cost $27,212,340)............................ 27,717,728
Overseas Portfolio; 218,122 shares at $17.05 per share (cost $3,555,791)........................... 3,718,987
Fidelity Investments Variable Insurance Products Funds II -
Asset Manager Portfolio; 910,080 shares at $15.79 per share (cost $12,839,173)..................... 14,370,158
Contrafund Portfolio; 2,202,984 shares at $13.78 per share (cost $30,071,951) ..................... 30,357,117
Index 500 Portfolio; 45,055 shares at $75.71 per share (cost $3,187,279) .......................... 3,411,144
Franklin Government Securities Trust; 1,651,095 shares at $13.35 per share
(cost $21,210,874) .............................................................................. 22,042,115
Janus Aspen Series -
Aggressive Growth Portfolio; 5,116,845 shares at $17.08 per share (cost $74,304,318)............... 87,395,716
Balanced Portfolio; 115,516 shares at $13.03 per share (cost $1,444,640)........................... 1,505,170
Flexible Income Portfolio; 347,266 shares at $11.11 per share (cost $3,690,542).................... 3,858,123
Growth Portfolio; 376,690 shares at $13.45 per share (cost $4,920,509)............................. 5,066,487
Short-Term Bond Portfolio; 54,258 shares at $10.03 per share (cost $544,564)....................... 544,210
Worldwide Growth Portfolio; 1,048,130 shares at $15.31 per share (cost $15,260,366)................ 16,046,863
Lexington Emerging Markets Fund, Inc.; 329,323 shares at $9.38 per share (cost $3,135,164) .......... 3,089,046
Lexington Natural Resources Trust; 1,257,565 shares at $11.30 per share (cost $12,932,744) .......... 14,210,484
Neuberger & Berman Advisers Management Trust - Growth Portfolio; 3,460,773 shares
at $25.86 per share (cost $77,838,858)............................................................ 89,495,579
Scudder Variable Life Investment Fund - International Portfolio; 13,936,090 shares
at $11.82 per share (cost $151,941,144).................................. ........................ 164,724,583
TCI Portfolios, Inc. - TCI Growth; 35,261,982 shares at $12.06 per share (cost $333,587,996) ........ 425,259,499
NET ASSETS ............................................................................................ 6,632,117,659
--------------
--------------
</TABLE>
S-3
<PAGE>
Net assets represented by:
<TABLE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
Reserves for annuity contracts in accumulation and payment period:
AETNA VARIABLE FUND:
Qualified I ..................................................... 549,055.7 $180.879 $99,312,649
Qualified III ................................................... 6,364,000.3 137.869 877,395,210
Qualified IV .................................................... 269.0 83.646 22,498
Qualified V ..................................................... 121,691.2 14.113 1,717,411
Qualified VI .................................................... 188,964,022.4 14.077 2,660,123,261
Qualified VII ................................................... 9,779,134.6 13.247 129,544,460
Qualified VIII .................................................. 20,835.7 13.074 272,413
Qualified IX .................................................... 21,417.9 12.935 277,043
Qualified X (1.15)............................................... 273,578.4 14.108 3,859,670
Qualified X (1.25)............................................... 2,370,233.5 14.077 33,366,740
Reserves for annuity contracts in payment period (Note 1)........ 144,049,741
AETNA INCOME SHARES:
Qualified I ..................................................... 72,902.0 47.405 3,455,895
Qualified III ................................................... 2,377,621.8 46.913 111,541,104
Qualified V ..................................................... 20,427.2 12.283 250,918
Qualified VI .................................................... 21,379,975.5 12.098 258,665,226
Qualified VII ................................................... 185,030.5 11.176 2,067,926
Qualified VIII .................................................. 1,090.6 11.143 12,153
Qualified IX .................................................... 3,580.8 11.203 40,116
Qualified X (1.15)............................................... 50,261.1 12.125 609,409
Qualified X (1.25)............................................... 354,993.3 12.098 4,294,879
Reserves for annuity contracts in payment period (Note 1) ....... 5,069,969
AETNA VARIABLE ENCORE FUND:
Qualified I ..................................................... 150,480.4 38.485 5,791,253
Qualified III ................................................... 1,836,260.4 37.988 69,756,054
Qualified V ..................................................... 19,202.4 11.003 211,293
Qualified VI .................................................... 12,999,680.2 11.026 143,337,034
Qualified VII ................................................... 324,091.0 10.936 3,544,190
Qualified VIII .................................................. 656.2 10.620 6,969
Qualified IX .................................................... 3,050.3 10.857 33,118
Qualified X (1.15)............................................... 145,629.4 11.051 1,609,306
Qualified X (1.25)............................................... 544,382.5 11.026 6,002,469
AETNA INVESTMENT ADVISERS FUND, INC.:
Qualified I ..................................................... 393,612.5 18.024 7,094,461
Qualified III ................................................... 9,193,181.4 17.954 165,052,015
Qualified V ..................................................... 19,038.2 13.693 260,683
Qualified VI .................................................... 38,152,394.6 13.673 521,663,491
Qualified VII ................................................... 335,791.4 13.135 4,410,596
Qualified VIII .................................................. 1,055.3 12.695 13,397
Qualified IX .................................................... 3,961.7 12.613 49,969
Qualified X (1.15)............................................... 138,270.8 13.703 1,894,705
Qualified X (1.25)............................................... 940,932.7 13.673 12,865,516
Reserves for annuity contracts in payment period (Note 1) ....... 9,712,862
AETNA GET FUND, SERIES B:
Qualified III .................................................. 63,245.0 12.850 812,688
S-4
<PAGE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
Qualified VI..................................................... 5,279,157.0 12.850 67,836,249
Qualified X (1.25)............................................... 349,212.6 12.850 4,487,321
AETNA ASCENT VARIABLE PORTFOLIO:
Qualified III.................................................... 8.4 10.673 90
Qualified V...................................................... 202.1 10.666 2,156
Qualified VI..................................................... 393,052.6 10.673 4,195,040
Qualified VIII................................................... 7.7 10.673 82
Qualified X (1.15)............................................... 15,054.8 10.982 165,326
Qualified X (1.25)............................................... 49,748.1 10.976 546,042
AETNA CROSSROADS VARIABLE PORTFOLIO:
Qualified V...................................................... 243.2 10.605 2,579
Qualified VI..................................................... 294,673.3 10.612 3,126,954
Qualified VIII................................................... 43.8 10.611 464
Qualified X (1.15)............................................... 2,393.5 10.868 26,012
Qualified X (1.25)............................................... 47,204.4 10.862 512,748
AETNA LEGACY VARIABLE PORTFOLIO:
Qualified VI..................................................... 143,636.5 10.580 1,519,662
Qualified X (1.15)............................................... 17,106.0 10.631 181,853
Qualified X (1.25)............................................... 20,531.2 10.626 218,165
ALGER AMERICAN FUNDS:
ALGER AMERICAN GROWTH PORTFOLIO:
Qualified III ................................................... 530,262.6 11.715 6,211,911
Qualified V...................................................... 7,965.7 10.365 82,564
Qualified VI..................................................... 2,832,439.7 10.157 28,770,111
Qualified VIII................................................... 38.3 10.371 397
Qualified X (1.15)............................................... 12,858.7 11.385 146,392
Qualified X (1.25)............................................... 284,978.1 11.379 3,242,625
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO:
Qualified III ................................................... 1,714,187.0 13.558 23,241,019
Qualified V ..................................................... 31,527.5 13.463 424,453
Qualified VI .................................................... 15,036,764.7 13.450 202,245,073
Qualified VIII .................................................. 3,845.1 14.093 54,189
Qualified X (1.15)............................................... 54,683.5 13.481 737,179
Qualified X (1.25)............................................... 1,081,374.8 13.450 14,544,534
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO:
Qualified III ................................................... 856,360.5 17.951 15,372,772
Qualified V ..................................................... 14,656.3 13.870 203,278
Qualified VI .................................................... 966,097.9 13.527 13,068,322
Qualified VIII .................................................. 3,611.6 12.291 44,389
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS:
EQUITY-INCOME PORTFOLIO:
Qualified III ................................................... 628,581.6 11.617 7,301,978
Qualified V ..................................................... 1,107.9 11.047 12,239
Qualified VI .................................................... 1,660,304.1 11.092 18,415,763
Qualified VIII .................................................. 638.7 11.054 7,060
Qualified X (1.15)............................................... 118,679.1 13.902 1,649,878
Qualified X (1.25)............................................... 766,359.8 13.880 10,637,021
GROWTH PORTFOLIO:
Qualified III ................................................... 762.1 10.198 7,772
Qualified V ..................................................... 2,540.5 10.183 25,871
Qualified VI .................................................... 1,833,793.9 10.066 18,458,844
S-5
<PAGE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
Qualified VIII .................................................. 158.7 10.190 1,617
Qualified X (1.15)............................................... 45,764.6 14.023 641,737
Qualified X (1.25)............................................... 612,991.7 14.000 8,581,887
OVERSEAS PORTFOLIO:
Qualified III ................................................... 1,301.8 10.197 13,274
Qualified V ..................................................... 190.8 9.954 1,899
Qualified VI .................................................... 196,089.8 9.961 1,953,206
Qualified X (1.15)............................................... 4,284.4 10.278 44,037
Qualified X (1.25)............................................... 166,303.2 10.262 1,706,571
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS II:
ASSET MANAGER PORTFOLIO:
Qualified III.................................................... 1,316,915.5 10.912 14,370,158
CONTRAFUND PORTFOLIO:
Qualified III ................................................... 525,476.0 11.763 6,181,326
Qualified V ..................................................... 6,415.4 10.461 67,111
Qualified VI .................................................... 2,116,732.0 10.397 22,007,519
Qualified VIII .................................................. 173.7 10.467 1,818
Qualified X (1.15)............................................... 5,452.8 10.689 63,737
Qualified X (1.25)............................................... 174,259.3 10.681 2,035,606
INDEX 500 PORTFOLIO:
Qualified III ................................................... 290,546.8 11.740 3,411,144
FRANKLIN GOVERNMENT SECURITIES TRUST:
Qualified III ................................................... 809,413.7 16.495 13,351,329
Qualified V ..................................................... 16,226.2 11.946 193,844
Qualified VI .................................................... 717,760.0 11.762 8,442,415
Qualified VIII .................................................. 4,916.9 11.090 54,527
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO:
Qualified III ................................................... 1,280,952.5 15.323 19,627,517
Qualified V.. ................................................... 15,482.4 13.296 205,852
Qualified VI. ................................................... 4,887,059.8 13.322 65,105,449
Qualified VIII .................................................. 1,021.7 13.321 13,610
Qualified X (1.15)............................................... 22,049.9 12.869 283,760
Qualified X (1.25)............................................... 167,919.9 12.861 2,159,528
BALANCED PORTFOLIO:
Qualified III ................................................... 161.4 10.853 1,751
Qualified V ..................................................... 160.2 10.843 1,737
Qualified VI .................................................... 93,303.8 10.850 1,012,385
Qualified X (1.15)............................................... 9,382.9 11.265 105,697
Qualified X (1.25)............................................... 34,071.6 11.259 383,600
FLEXIBLE INCOME PORTFOLIO:
Qualified III ................................................... 3,344.5 12.124 40,550
Qualified V ..................................................... 745.1 12.054 8,981
Qualified VI .................................................... 315,361.3 12.077 3,808,592
GROWTH PORTFOLIO:
Qualified III ................................................... 109,716.5 11.859 1,301,115
Qualified V. .................................................... 166.2 10.872 1,807
Qualified VI. ................................................... 259,195.5 10.870 2,817,612
Qualified X (1.15)............................................... 3,238.4 11.633 37,671
Qualified X (1.25)............................................... 78,126.0 11.626 908,282
S-6
<PAGE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
SHORT-TERM BOND PORTFOLIO:
Qualified III ................................................... 18,472.9 10.393 191,983
Qualified V ..................................................... 23.8 10.316 245
Qualified VI .................................................... 32,695.8 10.323 337,528
Qualified X (1.25)............................................... 1,405.3 10.285 14,454
WORLDWIDE GROWTH PORTFOLIO:
Qualified III ................................................... 314,652.7 12.158 3,825,607
Qualified V ..................................................... 11,127.9 10.952 121,875
Qualified VI .................................................... 1,036,039.6 10.877 11,268,519
Qualified VIII .................................................. 13.7 10.846 149
Qualified X (1.15)............................................... 2,616.9 12.223 31,987
Qualified X (1.25)............................................... 65,384.2 12.216 798,726
LEXINGTON EMERGING MARKETS FUND:
Qualified III ................................................... 371,155.8 8.323 3,089,046
LEXINGTON NATURAL RESOURCES TRUST:
Qualified III ................................................... 530,562.2 10.862 5,763,092
Qualified V ..................................................... 8,347.9 12.095 100,969
Qualified VI .................................................... 711,891.9 11.720 8,346,423
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST:
GROWTH PORTFOLIO:
Qualified III ................................................... 2,359,089.9 17.430 41,119,982
Qualified V ..................................................... 35,940.7 14.359 516,068
Qualified VI .................................................... 3,331,217.5 14.345 47,786,169
Qualified VIII .................................................. 5,947.6 12.334 73,360
SCUDDER VARIABLE LIFE INVESTMENT FUND:
INTERNATIONAL PORTFOLIO:
Qualified III ................................................... 3,823,292.2 14.515 55,495,694
Qualified V ..................................................... 38,067.4 13.799 525,305
Qualified VI .................................................... 7,323,208.0 13.923 101,958,550
Qualified VIII .................................................. 12,189.3 11.733 143,011
Qualified X (1.15)............................................... 41,921.0 13.952 584,886
Qualified X (1.25)............................................... 432,183.0 13.923 6,017,137
TCI PORTFOLIOS, INC.:
TCI GROWTH:
Qualified III *.................................................. 1,784,551.6 14.464 25,811,741
Qualified III .................................................. 4,184,701.2 13.224 55,336,455
Qualified V ..................................................... 24,825.6 15.176 376,753
Qualified VI .................................................... 21,986,645.3 15.253 335,360,124
Qualified VII ................................................... 63,035.5 12.840 809,380
Qualified VIII .................................................. 8,144.3 12.868 104,799
Qualified IX .................................................... 1,241.8 12.581 15,623
Qualified X (1.15)............................................... 13,306.7 15.285 203,397
Qualified X (1.25)............................................... 474,744.3 15.253 7,241,227
$6,632,117,659
--------------
--------------
</TABLE>
*Applies only to participants of the Opportunity Plus program and Multiple
Options Contracts.
See Notes to Financial Statements.
S-7
<PAGE>
VARIABLE ANNUITY ACCOUNT C
STATEMENT OF OPERATIONS - Year Ended December 31, 1995
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends: (Notes 1 and 3)
Aetna Variable Fund............................................................ $648,150,765
Aetna Income Shares............................................................ 23,872,308
Aetna Variable Encore Fund .................................................... 172,751
Aetna Investment Advisers Fund, Inc............................................ 47,274,300
Aetna GET Fund, Series B ...................................................... 1,878,972
Aetna Ascent Variable Portfolio ............................................... 110,626
Aetna Crossroads Variable Portfolio ........................................... 61,834
Aetna Legacy Variable Portfolio ............................................... 33,640
Calvert Responsibly Invested Balanced Portfolio .............................. 2,556,825
Fidelity Investments Variable Insurance Products Fund - Equity Income Portfolio 423,626
Fidelity Investments Variable Insurance Products Fund - Growth Portfolio ...... 10,256
Fidelity Investments Variable Insurance Products Fund - Overseas Portfolio .... 5,145
Fidelity Investments Variable Insurance Products Fund II - Asset Manager Portfolio 259,914
Fidelity Investments Variable Insurance Products Fund II - Contrafund Portfolio 379,043
Franklin Government Securities Trust .......................................... 1,061,449
Janus Aspen Series - Aggressive Growth Portfolio............................... 982,586
Janus Aspen Series - Balanced Portfolio........................................ 11,553
Janus Aspen Series - Flexible Income Portfolio................................. 151,761
Janus Aspen Series - Growth Portfolio.......................................... 91,472
Janus Aspen Series - Short-Term Bond Portfolio................................. 11,707
Janus Aspen Series - Worldwide Growth Portfolio................................ 50,858
Lexington Emerging Markets Fund................................................ 29,990
Lexington Natural Resources Trust.............................................. 59,767
Neuberger & Berman Advisers Management Trust - Growth Portfolio ............... 1,779,523
Scudder Variable Life Investment Fund - International Portfolio............... 670,720
TCI Portfolios, Inc. - TCI Growth.............................................. 339,221
--------------
Total investment income ..................................................... 730,430,612
Valuation period deductions (Note 2)............................................. (71,090,542)
--------------
Net investment income............................................................ 659,340,070
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1 and 4)
Proceeds from sales ........................................................... $570,154,582
Cost of investments sold ...................................................... 409,480,615
------------
Net realized gain ........................................................... 160,673,967
Net unrealized gain on investments:
Beginning of year ............................................................. 73,479,233
End of year ................................................................... 594,083,184
------------
Net unrealized gain ......................................................... 520,603,951
--------------
Net realized and unrealized gain on investments ................................. 681,277,918
--------------
Net increase in net assets resulting from operations ............................ $1,340,617,988
--------------
--------------
</TABLE>
See Notes to Financial Statements.
S-8
<PAGE>
VARIABLE ANNUITY ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
---- ----
<S> <C> <C>
FROM OPERATIONS:
Net investment income .......................................... $ 659,340,070 $ 476,196,420
Net realized and unrealized gain (loss) on investments .......... 681,277,918 (581,812,453)
Net increase (decrease) in net assets resulting from operations 1,340,617,988 (105,616,033)
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ..................... 771,594,245 711,565,372
Sales and administrative charges deducted by the Company ........ (98,694) (137,737)
Net variable annuity contract purchase payments ............... 771,495,551 711,427,635
Transfers from the Company for mortality guarantee adjustments .. 3,678,430 1,880,350
Transfers to the Company's fixed account options ................ (44,377,350) (56,920,532)
Transfers to other variable annuity accounts ........... 0 (23,284,415)
Redemptions by contract holders ................................. (287,945,984) (269,542,942)
Annuity payments ................................................ (14,807,537) (11,189,149)
Other ........................................................... 1,144,770 1,452,959
Net increase in net assets from unit transactions ............. 429,187,880 353,823,906
Change in net assets ............................................ 1,769,805,868 248,207,873
NET ASSETS:
Beginning of year ............................................... 4,862,311,791 4,614,103,918
End of year...................................................... $6,632,117,659 $4,862,311,791
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements.
S-9
<PAGE>
VARIABLE ANNUITY ACCOUNT C
NOTES TO FINANCIAL STATEMENTS - December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Variable Annuity Account C ("Account") is registered under the Investment
Company Act of 1940 as a unit investment trust. The Account is sold
exclusively for use with annuity contracts that are qualified under the
Internal Revenue Code of 1986, as amended.
The accompanying financial statements of the Account have been prepared in
accordance with generally accepted accounting principles.
a. VALUATION OF INVESTMENTS
Investments in the following Funds are stated at the closing net asset
value per share as determined by each Fund on December 31, 1995:
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna GET Fund, Series B
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Alger American Fund:
- Alger American Growth Portfolio
- Alger American Small Capitalization Portfolio
Calvert Responsibly Invested Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund:
- Equity-Income Portfolio
- Growth Portfolio
- Overseas Portfolio
Fidelity Investments Variable Insurance Products Fund II:
- Asset Manager Portfolio
- Contrafund Portfolio
- Index 500 Portfolio
Franklin Government Securities Trust
Janus Aspen Series:
- Aggressive Growth Portfolio
- Balanced Portfolio
- Flexible Income Portfolio
- Growth Portfolio
- Short-Term Bond Portfolio
- Worldwide Growth Portfolio
Lexington Emerging Markets Fund
Lexington Natural Resources Trust
Neuberger & Berman Advisers Management Trust:
- Growth Portfolio
Scudder Variable Life Investment Fund:
- International Portfolio
TCI Portfolios, Inc.:
- TCI Growth
b. OTHER
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
c. FEDERAL INCOME TAXES
The operations of Variable Annuity Account C form a part of, and are taxed
with, the total operations of Aetna Life Insurance and Annuity Company
("Company") which is taxed as a life insurance company under the Internal
Revenue Code of 1986, as amended.
d. ANNUITY RESERVES
Annuity reserves are computed for currently payable contracts according
to the Progressive Annuity, Individual Annuity Mortality, and Group
Annuity Mortality tables using various assumed interest rates not to
exceed seven percent. Mortality experience is monitored by the Company.
S-10
<PAGE>
VARIABLE ANNUITY ACCOUNT C
NOTES TO FINANCIAL STATEMENTS - December 31, 1995 (continued)
Charges to annuity reserves for mortality and expense risk experience are
reimbursed to the Company if the reserves required are less than originally
estimated. If additional reserves are required, the Company reimburses the
Account.
2. VALUATION PERIOD DEDUCTIONS
Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the contracts and are paid to the Company.
3. DIVIDEND INCOME
On an annual basis the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to
the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income and accumulated net realized gain on investments is included in net
unrealized gain in the Statement of Operations.
4. PURCHASES AND SALES OF INVESTMENTS
The cost of purchases and proceeds from sales of investments other than
short-term investments for the year ended December 31, 1995 aggregated
$1,658,682,532 and $570,154,582, respectively.
5. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.
S-11
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AETNA VARIABLE FUND:
Qualified I ............................................................. $138.406 $180.879 30.69%
Qualified III ........................................................... 105.558 137.869 30.61%
Qualified IV ............................................................ 63.884 83.646 30.93%
Qualified V ............................................................. 10.823 14.113 30.40%
Qualified VI ............................................................ 10.778 14.077 30.61%
Qualified VII ........................................................... 10.136 13.247 30.69%
Qualified VIII .......................................................... 10.011 13.074 30.60%
Qualified IX ............................................................ 9.879 12.935 30.93%
Qualified X (1.15) ...................................................... 10.791 14.108 30.74%
Qualified X (1.25) ...................................................... 10.778 14.077 30.61%
- -------------------------------------------------------------------------------------------------------------------------
AETNA INCOME SHARES:
Qualified I ............................................................. $ 40.570 $ 47.405 16.85%
Qualified III ........................................................... 40.173 46.913 16.78%
Qualified V ............................................................. 10.536 12.283 16.59%
Qualified VI ............................................................ 10.360 12.098 16.78%
Qualified VII ........................................................... 9.565 11.176 16.85%
Qualified VIII .......................................................... 9.543 11.143 16.77%
Qualified IX ............................................................ 9.570 11.203 17.07%
Qualified X (1.15) ...................................................... 10.373 12.125 16.89%
Qualified X (1.25) ...................................................... 10.360 12.098 16.78%
- -------------------------------------------------------------------------------------------------------------------------
AETNA VARIABLE ENCORE FUND:
Qualified I ............................................................. $ 36.723 $ 38.485 4.80%
Qualified III ........................................................... 36.271 37.988 4.73%
Qualified V ............................................................. 10.523 11.003 4.57%
Qualified VI ............................................................ 10.528 11.026 4.73%
Qualified VII ........................................................... 10.435 10.936 4.80%
Qualified VIII .......................................................... 10.141 10.620 4.73%
Qualified IX ............................................................ 10.341 10.857 5.00%
Qualified X (1.15) ...................................................... 10.541 11.051 4.84%
Qualified X (1.25) ...................................................... 10.528 11.026 4.73%
- -------------------------------------------------------------------------------------------------------------------------
AETNA INVESTMENT ADVISERS FUND, INC.:
Qualified I ............................................................. $ 14.317 $ 18.024 25.89%
Qualified III ........................................................... 14.270 17.954 25.82%
Qualified V ............................................................. 10.900 13.693 25.62%
Qualified VI ............................................................ 10.868 13.673 25.81%
Qualified VII ........................................................... 10.434 13.135 25.89%
Qualified VIII .......................................................... 10.091 12.695 25.81%
Qualified IX ............................................................ 10.000 12.613 26.13%
Qualified X (1.15) ...................................................... 10.880 13.703 25.95%
Qualified X (1.25) ...................................................... 10.868 13.673 25.81%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-12
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AETNA GET FUND, SERIES B:
Qualified III ........................................................... $ 10.160 $ 12.850 26.48%
Qualified VI ............................................................ 10.160 12.850 26.48%
Qualified X (1.25) ...................................................... 10.160 12.850 26.48%
- -------------------------------------------------------------------------------------------------------------------------
AETNA ASCENT VARIABLE PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.673 6.73% (4)
Qualified V ............................................................. 10.000 10.666 6.66% (5)
Qualified VI ............................................................ 10.000 10.673 6.73% (5)
Qualified VIII .......................................................... 10.000 10.673 6.73% (5)
Qualified X (1.15) ...................................................... 10.000 10.982 9.82% (3)
Qualified X (1.25) ...................................................... 10.000 10.976 9.76% (3)
- -------------------------------------------------------------------------------------------------------------------------
AETNA CROSSROADS VARIABLE PORTFOLIO:
Qualified V ............................................................. $ 10.000 $ 10.605 6.05% (5)
Qualified VI ............................................................ 10.000 10.612 6.12% (5)
Qualified VIII .......................................................... 10.000 10.611 6.11% (5)
Qualified X (1.15) ...................................................... 10.000 10.868 8.68% (3)
Qualified X (1.25) ...................................................... 10.000 10.862 8.62% (3)
- -------------------------------------------------------------------------------------------------------------------------
AETNA LEGACY VARIABLE PORTFOLIO:
Qualified VI ............................................................ $ 10.000 $ 10.580 5.80% (5)
Qualified X (1.15) ...................................................... 10.000 10.631 6.31% (4)
Qualified X (1.25) ...................................................... 10.000 10.626 6.26% (4)
- -------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN FUNDS:
ALGER AMERICAN GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.715 17.15% (4)
Qualified V ............................................................. 10.000 10.365 3.65% (5)
Qualified VI ............................................................ 10.000 10.157 1.57% (5)
Qualified VIII .......................................................... 10.000 10.371 3.71% (5)
Qualified X (1.15) ...................................................... 10.000 11.385 13.85% (3)
Qualified X (1.25) ...................................................... 10.000 11.379 13.79% (3)
- -------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO:
Qualified III ........................................................... $ 9.513 $ 13.558 42.52%
Qualified V ............................................................. 9.461 13.463 42.29%
Qualified VI ............................................................ 9.437 13.450 42.52%
Qualified VIII .......................................................... 9.889 14.093 42.51%
Qualified X (1.15) ...................................................... 9.450 13.481 42.66%
Qualified X (1.25) ...................................................... 9.437 13.450 42.52%
- -------------------------------------------------------------------------------------------------------------------------
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO:
Qualified III ........................................................... $ 13.990 $ 17.951 28.31%
Qualified V ............................................................. 10.839 13.870 27.96%
Qualified VI ............................................................ 10.554 13.527 28.17%
Qualified VIII .......................................................... 9.590 12.291 28.16%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
(Decrease)
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS:
EQUITY - INCOME PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.617 16.17% (2)
Qualified V ............................................................. 10.000 11.047 10.47% (5)
Qualified VI ............................................................ 10.000 11.092 10.92% (5)
Qualified VIII .......................................................... 10.000 11.054 10.54% (5)
Qualified X (1.15) ...................................................... 10.409 13.902 33.55%
Qualified X (1.25) ...................................................... 10.403 13.880 33.42%
- -------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.198 1.98% (4)
Qualified V ............................................................. 10.000 10.183 1.83% (5)
Qualified VI ............................................................ 10.000 10.066 0.66% (5)
Qualified VIII .......................................................... 10.000 10.190 1.90% (5)
Qualified X (1.15) ...................................................... 10.479 14.023 33.82%
Qualified X (1.25) ...................................................... 10.472 14.000 33.69%
- -------------------------------------------------------------------------------------------------------------------------
OVERSEAS PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.197 1.97% (4)
Qualified V ............................................................. 10.000 9.954 (0.46%) (5)
Qualified VI ............................................................ 10.000 9.961 (0.39%) (5)
Qualified X (1.15) ...................................................... 9.480 10.278 8.43%
Qualified X (1.25) ...................................................... 9.474 10.262 8.32%
- -------------------------------------------------------------------------------------------------------------------------
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS II:
ASSET MANAGER PORTFOLIO:
Qualified III ........................................................... $ 9.447 $ 10.912 15.51%
- -------------------------------------------------------------------------------------------------------------------------
CONTRAFUND PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.763 17.63% (2)
Qualified V ............................................................. 10.000 10.461 4.61% (5)
Qualified VI ............................................................ 10.000 10.397 3.97% (5)
Qualified VIII .......................................................... 10.000 10.467 4.67% (5)
Qualified X (1.15) ...................................................... 10.000 10.689 6.89% (2)
Qualified X (1.25) ...................................................... 10.000 10.681 6.81% (2)
- -------------------------------------------------------------------------------------------------------------------------
INDEX 500 PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.740 17.40% (2)
- -------------------------------------------------------------------------------------------------------------------------
FRANKLIN GOVERNMENT SECURITIES TRUST:
Qualified III ........................................................... $ 14.190 $ 16.495 16.24%
Qualified V ............................................................. 10.294 11.946 16.06%
Qualified VI ............................................................ 10.119 11.762 16.24%
Qualified VIII .......................................................... 9.541 11.090 16.23%
- -------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO:
Qualified III ........................................................... $ 12.169 $ 15.323 25.91%
Qualified V ............................................................. 10.577 13.296 25.71%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
(Decrease)
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO (continued):
Qualified VI ............................................................ $ 10.581 $ 13.322 25.91%
Qualified VIII .......................................................... 10.581 13.321 25.90%
Qualified X (1.15) ...................................................... 10.000 12.869 28.69% (2)
Qualified X (1.25) ...................................................... 10.000 12.861 28.61% (2)
- -------------------------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.853 8.53% (4)
Qualified V ............................................................. 10.000 10.843 8.43% (5)
Qualified VI ............................................................ 10.000 10.850 8.50% (5)
Qualified X (1.15) ...................................................... 10.000 11.265 12.65% (3)
Qualified X (1.25) ...................................................... 10.000 11.259 12.59% (3)
- -------------------------------------------------------------------------------------------------------------------------
FLEXIBLE INCOME PORTFOLIO:
Qualified III ........................................................... $ 9.911 $ 12.124 22.33%
Qualified V ............................................................. 10.000 12.054 20.54% (1)
Qualified VI ............................................................ 9.873 12.077 22.33%
- -------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.859 18.59% (4)
Qualified V ............................................................. 10.000 10.872 8.72% (5)
Qualified VI ............................................................ 10.000 10.870 8.70% (5)
Qualified X (1.15) ...................................................... 10.000 11.633 16.33% (3)
Qualified X (1.25) ...................................................... 10.000 11.626 16.26% (3)
- -------------------------------------------------------------------------------------------------------------------------
SHORT TERM BOND PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.393 3.93% (4)
Qualified V ............................................................. 10.000 10.316 3.16% (5)
Qualified VI ............................................................ 10.000 10.323 3.23% (5)
Qualified X (1.25) ...................................................... 10.000 10.285 2.85% (4)
- -------------------------------------------------------------------------------------------------------------------------
WORLDWIDE GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 12.158 21.58% (4)
Qualified V ............................................................. 10.000 10.952 9.52% (4)
Qualified VI ............................................................ 10.000 10.877 8.77% (5)
Qualified VIII .......................................................... 10.000 10.846 8.46% (5)
Qualified X (1.15) ...................................................... 10.000 12.223 22.23% (2)
Qualified X (1.25) ...................................................... 10.000 12.216 22.16% (2)
- -------------------------------------------------------------------------------------------------------------------------
LEXINGTON EMERGING MARKETS FUND:
Qualified III ........................................................... $ 8.772 $ 8.323 (5.12%)
- -------------------------------------------------------------------------------------------------------------------------
LEXINGTON NATURAL RESOURCES TRUST:
Qualified III ........................................................... $ 9.412 $ 10.862 15.41%
Qualified V ............................................................. 10.496 12.095 15.24%
Qualified VI ............................................................ 10.154 11.720 15.42%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-15
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST - GROWTH PORTFOLIO:
Qualified III ........................................................... $ 13.398 $ 17.430 30.09%
Qualified V ............................................................. 11.055 14.359 29.89%
Qualified VI ............................................................ 11.026 14.345 30.10%
Qualified VIII .......................................................... 9.482 12.334 30.09%
- --------------------------------------------------------------------------------------------------------------------------
SCUDDER VARIABLE LIFE INVESTMENT FUND - INTERNATIONAL
PORTFOLIO:
Qualified III ........................................................... $ 13.227 $ 14.515 9.74%
Qualified V ............................................................. 12.595 13.799 9.56%
Qualified VI ............................................................ 12.687 13.923 9.74%
Qualified VIII .......................................................... 10.692 11.733 9.73%
Qualified X (1.15) ...................................................... 12.701 13.952 9.85%
Qualified X (1.25) ...................................................... 12.687 13.923 9.74%
- --------------------------------------------------------------------------------------------------------------------------
TCI PORTFOLIOS, INC.:
TCI GROWTH:
Qualified III* .......................................................... $ 11.172 $ 14.464 29.47%
Qualified III ........................................................... 10.213 13.224 29.47%
Qualified V ............................................................. 11.740 15.176 29.27%
Qualified VI ............................................................ 11.781 15.253 29.47%
Qualified VII ........................................................... 9.911 12.840 29.55%
Qualified VIII .......................................................... 9.939 12.868 29.46%
Qualified IX ............................................................ 9.693 12.581 29.80%
Qualified X (1.15) ...................................................... 11.794 15.285 29.60%
Qualified X (1.25) ...................................................... 11.781 15.253 29.47%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Applies only to participants of the Opportunity Plus program and Multiple
Options Contracts.
QUALIFIED I Individual contracts issued prior to May 1, 1975
in connection with "Qualified Corporate Retirement
Plans" established pursuant to Section 401 of the
Internal Revenue Code ("Code"); "Tax-Deferred
Annuity Plans" established by the public school
systems and tax-exempt organizations pursuant to
Section 403(b) of the Code, and certain Individual
Retirement Annuity Plans established by or on
behalf of individuals pursuant to section 408(b)
of the Code; Individual contracts issued prior to
November 1, 1975 in connection with "H.R. 10
Plans" established by persons entitled to the
benefits of the Self-Employed Individuals Tax
Retirement Act of 1962, as amended; allocated
group contracts issued prior to May 1, 1975 in
connection with Qualified Corporate Retirement
Plans; and group contracts issued prior to
October 1, 1978 in connection with Tax-Deferred
Annuity Plans.
QUALIFIED III Individual contracts issued in connection with
Tax-Deferred Annuity Plans and Individual
Retirement Annuity Plans since May 1, 1975, H.R.
10 Plans since November 1, 1975; group contracts
issued since October 1, 1978 in connection with
Tax-Deferred Annuity
S-16
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
- --------------------------------------------------------------------------------
QUALIFIED III (continued): Plans and group contracts issued since May 1, 1979
in connection with "Deferred Compensation Plans"
adopted by state and local governments and H.R. 10
Plans.
QUALIFIED IV Certain large group contracts (Jumbo) issued in
connection with Tax-Deferred Annuity Plans and
Deferred Compensation Plans issued since
January 1, 1979.
QUALIFIED V Group AetnaPlus contracts issued since August 28,
1992 in connection with "Optional Retirement
Plans" established pursuant to Section 403(b) or
401(a) of the Internal Revenue Code.
QUALIFIED VI Group AetnaPlus contracts issued in connection
with Tax-Deferred Annuity Plans and Retirement
Plus Plans since August 28, 1992.
QUALIFIED VII Certain existing contracts that were converted to
ACES, the new administrative system (Previously
valued under Qualified I).
QUALIFIED VIII "Group Aetna Plus" contracts issued in connection
with Tax-Deferred Annuity Plans and "Deferred
Compensation Plans" adopted by state and local
governments since June 30, 1993.
QUALIFIED IX Certain large group contracts (Jumbo) that were
converted to ACES, the new administrative system
(previously valued under Qualified VI).
QUALIFIED X Individual Retirement Annuity and Simplified
Employee Pension Plans issued or converted to
ACES, the new administrative system.
1 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during March 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
2 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during May 1995 when the
fund became available under the contract or the applicable daily asset
charge was first utilized.
3 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during June 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
4 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during July 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
5 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during August 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
S-17
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Independent Auditors' Report..................................... F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993.............................. F-3
Consolidated Balance Sheets as of December 31, 1995 and 1994... F-4
Consolidated Statements of Changes in Shareholder's Equity for
the Years Ended
December 31, 1995, 1994 and 1993.............................. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993.............................. F-6
Notes to Consolidated Financial Statements....................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, changes in shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aetna Life Insurance
and Annuity Company and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993 the
Company changed its methods of accounting for certain investments in debt and
equity securities.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 6, 1996
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Income
(millions)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Premiums............................................. $ 130.8 $ 124.2 $ 82.1
Charges assessed against policyholders............... 318.9 279.0 251.5
Net investment income................................ 1,004.3 917.2 911.9
Net realized capital gains........................... 41.3 1.5 9.5
Other income......................................... 42.0 10.3 9.5
-------- -------- --------
Total revenue...................................... 1,537.3 1,332.2 1,264.5
-------- -------- --------
Benefits and expenses:
Current and future benefits.......................... 915.3 854.1 818.4
Operating expenses................................... 318.7 235.2 207.2
Amortization of deferred policy acquisition costs.... 43.3 26.4 19.8
-------- -------- --------
Total benefits and expenses........................ 1,277.3 1,115.7 1,045.4
-------- -------- --------
Income before federal income taxes..................... 260.0 216.5 219.1
Federal income taxes................................. 84.1 71.2 76.2
-------- -------- --------
Net income............................................. $ 175.9 $ 145.3 $ 142.9
-------- -------- --------
-------- -------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Balance Sheets
(millions)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
- -------------------------------------------------------
Investments:
Debt securities, available for sale:
(amortized cost: $11,923.7 and $10,577.8)........... $12,720.8 $10,191.4
Equity securities, available for sale:
Non-redeemable preferred stock (cost: $51.3 and
$43.3)............................................ 57.6 47.2
Investment in affiliated mutual funds (cost: $173.4
and $187.1)....................................... 191.8 181.9
Common stock (cost: $6.9 at December 31, 1995)..... 8.2 --
Short-term investments............................... 15.1 98.0
Mortgage loans....................................... 21.2 9.9
Policy loans......................................... 338.6 248.7
Limited partnership.................................. -- 24.4
--------- ---------
Total investments................................ 13,353.3 10,801.5
Cash and cash equivalents.............................. 568.8 623.3
Accrued investment income.............................. 175.5 142.2
Premiums due and other receivables..................... 37.3 75.8
Deferred policy acquisition costs...................... 1,341.3 1,164.3
Reinsurance loan to affiliate.......................... 655.5 690.3
Other assets........................................... 26.2 15.9
Separate Accounts assets............................... 10,987.0 7,420.8
--------- ---------
Total assets..................................... $27,144.9 $20,934.1
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY
- -------------------------------------------------------
Liabilities:
Future policy benefits............................... $ 3,594.6 $ 2,912.7
Unpaid claims and claim expenses..................... 27.2 23.8
Policyholders' funds left with the Company........... 10,500.1 8,949.3
--------- ---------
Total insurance reserve liabilities.............. 14,121.9 11,885.8
Other liabilities.................................... 259.2 302.1
Federal income taxes:
Current............................................ 24.2 3.4
Deferred........................................... 169.6 233.5
Separate Accounts liabilities........................ 10,987.0 7,420.8
--------- ---------
Total liabilities................................ 25,561.9 19,845.6
--------- ---------
--------- ---------
Shareholder's equity:
Common stock, par value $50 (100,000 shares
authorized;
55,000 shares issued and outstanding)............... 2.8 2.8
Paid-in capital...................................... 407.6 407.6
Net unrealized capital gains (losses)................ 132.5 (189.0)
Retained earnings.................................... 1,040.1 867.1
--------- ---------
Total shareholder's equity....................... 1,583.0 1,088.5
--------- ---------
Total liabilities and shareholder's equity..... $27,144.9 $20,934.1
--------- ---------
--------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Shareholder's equity, beginning of year................ $ 1,088.5 $ 1,246.7 $ 990.1
Net change in unrealized capital gains (losses)........ 321.5 (303.5) 113.7
Net income............................................. 175.9 145.3 142.9
Common stock dividends declared........................ (2.9) -- --
--------- --------- ---------
Shareholder's equity, end of year...................... $ 1,583.0 $ 1,088.5 $ 1,246.7
--------- --------- ---------
--------- --------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income........................................... $ 175.9 $ 145.3 $ 142.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accrued investment income.............. (33.3) (17.5) (11.1)
Decrease (increase) in premiums due and other
receivables....................................... 25.4 1.3 (5.6)
Increase in policy loans........................... (89.9) (46.0) (36.4)
Increase in deferred policy acquisition costs...... (177.0) (105.9) (60.5)
Decrease in reinsurance loan to affiliate.......... 34.8 27.8 31.8
Net increase in universal life account balances.... 393.4 164.7 126.4
Increase in other insurance reserve liabilities.... 79.0 75.1 86.1
Net increase in other liabilities and other
assets............................................ 15.0 53.9 7.0
Decrease in federal income taxes................... (6.5) (11.7) (3.7)
Net accretion of discount on bonds................. (66.4) (77.9) (88.1)
Net realized capital gains......................... (41.3) (1.5) (9.5)
Other, net......................................... -- (1.0) 0.2
---------- ---------- ----------
Net cash provided by operating activities........ 309.1 206.6 179.5
---------- ---------- ----------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale................. 4,207.2 3,593.8 473.9
Equity securities.................................. 180.8 93.1 89.6
Mortgage loans..................................... 10.7 -- --
Limited partnership................................ 26.6 -- --
Investment maturities and collections of:
Debt securities available for sale................. 583.9 1,289.2 2,133.3
Short-term investments............................. 106.1 30.4 19.7
Cost of investment purchases in:
Debt securities.................................... (6,034.0) (5,621.4) (3,669.2)
Equity securities.................................. (170.9) (162.5) (157.5)
Short-term investments............................. (24.7) (106.1) (41.3)
Mortgage loans..................................... (21.3) -- --
Limited partnership................................ -- (25.0) --
---------- ---------- ----------
Net cash used for investing activities........... (1,135.6) (908.5) (1,151.5)
---------- ---------- ----------
Cash Flows from Financing Activities:
Deposits and interest credited for investment
contracts........................................... 1,884.5 1,737.8 2,117.8
Withdrawals of investment contracts.................. (1,109.6) (948.7) (1,000.3)
Dividends paid to shareholder........................ (2.9) -- --
---------- ---------- ----------
Net cash provided by financing activities........ 772.0 789.1 1,117.5
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents... (54.5) 87.2 145.5
Cash and cash equivalents, beginning of year........... 623.3 536.1 390.6
---------- ---------- ----------
Cash and cash equivalents, end of year................. $ 568.8 $ 623.3 $ 536.1
---------- ---------- ----------
---------- ---------- ----------
Supplemental cash flow information:
Income taxes paid, net............................... $ 90.2 $ 82.6 $ 79.9
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Aetna Life Insurance and Annuity Company and its wholly owned subsidiaries
(collectively, the "Company") is a provider of financial services and life
insurance products in the United States. The Company has two business segments,
financial services and life insurance.
The financial services products include individual and group annuity contracts
which offer a variety of funding and distribution options for personal and
employer-sponsored retirement plans that qualify under Internal Revenue Code
Sections 401, 403, 408 and 457, and individual and group non-qualified annuity
contracts. These contracts may be immediate or deferred and are offered
primarily to individuals, pension plans, small businesses and employer-sponsored
groups in the health care, government, education (collectively "not-for-profit"
organizations) and corporate markets. Financial services also include pension
plan administrative services.
The life insurance products include universal life, variable universal life,
interest sensitive whole life and term insurance. These products are offered
primarily to individuals, small businesses, employer sponsored groups and
executives of Fortune 2000 companies.
BASIS OF PRESENTATION
The consolidated financial statements include Aetna Life Insurance and Annuity
Company and its wholly owned subsidiaries, Aetna Insurance Company of America
and Aetna Private Capital, Inc. Aetna Life Insurance and Annuity Company is a
wholly owned subsidiary of Aetna Retirement Services, Inc. ("ARSI"). ARSI is a
wholly owned subsidiary of Aetna Life and Casualty Company ("Aetna"). Two
subsidiaries, Systematized Benefits Administrators, Inc. ("SBA"), and Aetna
Investment Services, Inc. ("AISI"), which were previously reported in the
consolidated financial statements were distributed in the form of dividends to
ARSI in December of 1995. The impact to the Company's financial statements of
distributing these dividends was immaterial.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. Intercompany transactions have been
eliminated. Certain reclassifications have been made to 1994 and 1993 financial
information to conform to the 1995 presentation.
ACCOUNTING CHANGES
Accounting for Certain Investments in Debt and Equity Securities
On December 31, 1993, the Company adopted Financial Accounting Standard ("FAS")
No. 115, Accounting for Certain Investments in Debt and Equity Securities, which
requires the classification of debt securities into three categories: "held to
maturity", which are carried at amortized cost; "available for sale", which are
carried at fair value with changes in fair value recognized as a component of
shareholder's equity; and "trading", which are carried at fair value with
immediate recognition in income of changes in fair value.
Initial adoption of this standard resulted in a net increase of $106.8 million,
net of taxes of $57.5 million, to net unrealized gains in shareholder's equity.
These amounts exclude gains and losses allocable to experience-rated (including
universal life) contractholders. Adoption of FAS No. 115 did not have a material
effect on deferred policy acquisition costs.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from reported results using those estimates.
CASH AND CASH EQUIVALENT
Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with a maturity of ninety days or less when purchased.
INVESTMENTS
Debt Securities
At December 31, 1995 and 1994, all of the Company's debt securities are
classified as available for sale and carried at fair value. These securities are
written down (as realized losses) for other than temporary decline in value.
Unrealized gains and losses related to these securities, after deducting amounts
allocable to experience-rated contractholders and related taxes, are reflected
in shareholder's equity.
Fair values for debt securities are based on quoted market prices or dealer
quotations. Where quoted market prices or dealer quotations are not available,
fair values are measured utilizing quoted market prices for similar securities
or by using discounted cash flow methods. Cost for mortgage-backed securities is
adjusted for unamortized premiums and discounts, which are amortized using the
interest method over the estimated remaining term of the securities, adjusted
for anticipated prepayments.
Purchases and sales of debt securities are recorded on the trade date.
Equity Securities
Equity securities are classified as available for sale and carried at fair value
based on quoted market prices or dealer quotations. Equity securities are
written down (as realized losses) for other than temporary declines in value.
Unrealized gains and losses related to such securities are reflected in
shareholder's equity. Purchases and sales are recorded on the trade date.
The investment in affiliated mutual funds represents an investment in the Aetna
Series Fund, Inc., a retail mutual fund which has been seeded by the Company,
and is carried at fair value.
Mortgage Loans and Policy Loans
Mortgage loans and policy loans are carried at unpaid principal balances net of
valuation reserves, which approximates fair value, and are generally secured.
Purchases and sales of mortgage loans are recorded on the closing date.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Limited Partnership
The Company's limited partnership investment was carried at the amount invested
plus the Company's share of undistributed operating results and unrealized gains
(losses), which approximates fair value. The Company disposed of the limited
partnership during 1995.
Short-Term Investments
Short-term investments, consisting primarily of money market instruments and
other debt issues purchased with an original maturity of over ninety days and
less than one year, are considered available for sale and are carried at fair
value, which approximates amortized cost.
DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring insurance business have been deferred. These costs,
all of which vary with and are primarily related to the production of new
business, consist principally of commissions, certain expenses of underwriting
and issuing contracts and certain agency expenses. For fixed ordinary life
contracts, such costs are amortized over expected premium-paying periods. For
universal life and certain annuity contracts, such costs are amortized in
proportion to estimated gross profits and adjusted to reflect actual gross
profits. These costs are amortized over twenty years for annuity pension
contracts, and over the contract period for universal life contracts.
Deferred policy acquisition costs are written off to the extent that it is
determined that future policy premiums and investment income or gross profits
would not be adequate to cover related losses and expenses.
INSURANCE RESERVE LIABILITIES
The Company's liabilities include reserves related to fixed ordinary life, fixed
universal life and fixed annuity contracts. Reserves for future policy benefits
for fixed ordinary life contracts are computed on the basis of assumed
investment yield, assumed mortality, withdrawals and expenses, including a
margin for adverse deviation, which generally vary by plan, year of issue and
policy duration. Reserve interest rates range from 2.25% to 10.00%. Assumed
investment yield is based on the Company's experience. Mortality and withdrawal
rate assumptions are based on relevant Aetna experience and are periodically
reviewed against both industry standards and experience.
Reserves for fixed universal life (included in Future Policy Benefits) and fixed
deferred annuity contracts (included in Policyholders' Funds Left With the
Company) are equal to the fund value. The fund value is equal to cumulative
deposits less charges plus credited interest thereon, without reduction for
possible future penalties assessed on premature withdrawal. For guaranteed
interest options, the interest credited ranged from 4.00% to 6.38% in 1995 and
4.00% to 5.85% in 1994. For all other fixed options, the interest credited
ranged from 5.00% to 7.00% in 1995 and 5.00% to 7.50% in 1994.
Reserves for fixed annuity contracts in the annuity period and for future
amounts due under settlement options are computed actuarially using the 1971
Individual Annuity Mortality Table, the 1983 Individual Annuity Mortality Table,
the
F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
1983 Group Annuity Mortality Table and, in some cases, mortality improvement
according to scales G and H, at assumed interest rates ranging from 3.5% to
9.5%. Reserves relating to contracts with life contingencies are included in
Future Policy Benefits. For other contracts, the reserves are reflected in
Policyholders' Funds Left With the Company.
Unpaid claims for all lines of insurance include benefits for reported losses
and estimates of benefits for losses incurred but not reported.
PREMIUMS, CHARGES ASSESSED AGAINST POLICYHOLDERS, BENEFITS AND EXPENSES
Premiums are recorded as revenue when due for fixed ordinary life contracts.
Charges assessed against policyholders' funds for cost of insurance, surrender
charges, actuarial margin and other fees are recorded as revenue for universal
life and certain annuity contracts. Policy benefits and expenses are recorded in
relation to the associated premiums or gross profit so as to result in
recognition of profits over the expected lives of the contracts.
SEPARATE ACCOUNTS
Assets held under variable universal life, variable life and variable annuity
contracts are segregated in Separate Accounts and are invested, as designated by
the contractholder or participant under a contract, in shares of Aetna Variable
Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment Advisers
Fund, Inc., Aetna GET Fund, or The Aetna Series Fund Inc., which are managed by
the Company or other selected mutual funds not managed by the Company. Separate
Accounts assets and liabilities are carried at fair value except for those
relating to a guaranteed interest option which is offered through a Separate
Account. The assets of the Separate Account supporting the guaranteed interest
option are carried at an amortized cost of $322.2 million for 1995 (fair value
$343.9 million) and $149.7 million for 1994 (fair value $146.3 million), since
the Company bears the investment risk where the contract is held to maturity.
Reserves relating to the guaranteed interest option are maintained at fund value
and reflect interest credited at rates ranging from 4.5% to 8.38% in both 1995
and 1994. Separate Accounts assets and liabilities are shown as separate
captions in the Consolidated Balance Sheets. Deposits, investment income and net
realized and unrealized capital gains (losses) of the Separate Accounts are not
reflected in the Consolidated Statements of Income (with the exception of
realized capital gains (losses) on the sale of assets supporting the guaranteed
interest option). The Consolidated Statements of Cash Flows do not reflect
investment activity of the Separate Accounts.
FEDERAL INCOME TAXES
The Company is included in the consolidated federal income tax return of Aetna.
The Company is taxed at regular corporate rates after adjusting income reported
for financial statement purposes for certain items. Deferred income tax benefits
result from changes during the year in cumulative temporary differences between
the tax basis and book basis of assets and liabilities.
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS
Investments in debt securities available for sale as of December 31, 1995 were
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies and corporations... $ 539.5 $ 47.5 $ -- $ 587.0
Obligations of states and political
subdivisions................................ 41.4 12.4 -- 53.8
U.S. Corporate securities:
Financial.................................. 2,764.4 110.3 2.1 2,872.6
Utilities.................................. 454.4 27.8 1.0 481.2
Other...................................... 2,177.7 159.5 1.2 2,336.0
--------- ---------- ----- ---------
Total U.S. Corporate securities............ 5,396.5 297.6 4.3 5,689.8
Foreign securities:
Government................................. 316.4 26.1 2.0 340.5
Financial.................................. 534.2 45.4 3.5 576.1
Utilities.................................. 236.3 32.9 -- 269.2
Other...................................... 215.7 15.1 -- 230.8
--------- ---------- ----- ---------
Total Foreign securities................... 1,302.6 119.5 5.5 1,416.6
Residential mortgage-backed securities:
Residential pass-throughs.................. 556.7 99.2 1.8 654.1
Residential CMOs........................... 2,383.9 167.6 2.2 2,549.3
--------- ---------- ----- ---------
Total Residential mortgage-backed
securities................................ 2,940.6 266.8 4.0 3,203.4
Commercial/Multifamily mortgage-backed
securities.................................. 741.9 32.3 0.2 774.0
--------- ---------- ----- ---------
Total Mortgage-backed securities........... 3,682.5 299.1 4.2 3,977.4
Other asset-backed securities................ 961.2 35.5 0.5 996.2
--------- ---------- ----- ---------
Total debt securities available for sale..... $11,923.7 $811.6 $14.5 $12,720.8
--------- ---------- ----- ---------
--------- ---------- ----- ---------
</TABLE>
F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
Investments in debt securities available for sale as of December 31, 1994 were
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies and corporations... $ 1,396.1 $ 2.0 $ 84.2 $ 1,313.9
Obligations of states and political
subdivisions................................ 37.9 1.2 -- 39.1
U.S. Corporate securities:
Financial.................................. 2,216.9 3.8 109.4 2,111.3
Utilities.................................. 100.1 -- 7.9 92.2
Other...................................... 1,344.3 6.0 67.9 1,282.4
--------- ---------- ---------- ---------
Total U.S. Corporate securities............ 3,661.3 9.8 185.2 3,485.9
Foreign securities:
Government................................. 434.4 1.2 33.9 401.7
Financial.................................. 368.2 1.1 23.0 346.3
Utilities.................................. 204.4 2.5 9.5 197.4
Other...................................... 46.3 0.8 1.5 45.6
--------- ---------- ---------- ---------
Total Foreign securities................... 1,053.3 5.6 67.9 991.0
Residential mortgage-backed securities:
Residential pass-throughs.................. 627.1 81.5 5.0 703.6
Residential CMOs........................... 2,671.0 32.9 139.4 2,564.5
--------- ---------- ---------- ---------
Total Residential mortgage-backed
securities.................................. 3,298.1 114.4 144.4 3,268.1
Commercial/Multifamily mortgage-backed
securities.................................. 435.0 0.2 21.3 413.9
--------- ---------- ---------- ---------
Total Mortgage-backed securities............. 3,733.1 114.6 165.7 3,682.0
Other asset-backed securities................ 696.1 0.2 16.8 679.5
--------- ---------- ---------- ---------
Total debt securities available for sale..... $10,577.8 $133.4 $519.8 $10,191.4
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
</TABLE>
At December 31, 1995 and 1994, net unrealized appreciation (depreciation) of
$797.1 million and $(386.4) million, respectively, on available for sale debt
securities included $619.1 million and $(308.6) million, respectively, related
to experience-rated contractholders, which were not included in shareholder's
equity.
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
The amortized cost and fair value of debt securities for the year ended December
31, 1995 are shown below by contractual maturity. Actual maturities may differ
from contractual maturities because securities may be restructured, called, or
prepaid.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- ---------
(MILLIONS)
<S> <C> <C>
Due to mature:
One year or less..................................... $ 348.8 $ 351.1
After one year through five years.................... 2,100.2 2,159.5
After five years through ten years................... 2,516.0 2,663.4
After ten years...................................... 2,315.0 2,573.2
Mortgage-backed securities........................... 3,682.5 3,977.4
Other asset-backed securities........................ 961.2 996.2
--------- ---------
Total................................................ $11,923.7 $12,720.8
--------- ---------
--------- ---------
</TABLE>
The Company engages in securities lending whereby certain securities from its
portfolio are loaned to other institutions for short periods of time. Cash
collateral, which is in excess of the market value of the loaned securities, is
deposited by the borrower with a lending agent, and retained and invested by the
lending agent to generate additional income for the Company. The market value of
the loaned securities is monitored on a daily basis with additional collateral
obtained or refunded as the market value fluctuates. At December 31, 1995, the
Company had loaned securities (which are reflected as invested assets on the
Consolidated Balance Sheets) with a market value of approximately $264.5
million.
At December 31, 1995 and 1994, debt securities carried at $7.4 million and $7.0
million, respectively, were on deposit as required by regulatory authorities.
The valuation reserve for mortgage loans was $3.1 million at December 31, 1994.
There was no valuation reserve for mortgage loans at December 31, 1995. The
carrying value of non-income producing investments was $0.1 million and $0.2
million at December 31, 1995 and 1994, respectively.
F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
Investments in a single issuer, other than obligations of the U.S. government,
with a carrying value in excess of 10% of the Company's shareholder's equity at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
AMORTIZED
DEBT SECURITIES COST FAIR VALUE
---------- ----------
(MILLIONS)
<S> <C> <C>
General Electric Corporation........................... $ 314.9 $ 329.3
General Motors Corporation............................. 273.9 284.5
Associates Corporation of North America................ 230.2 239.1
Society National Bank.................................. 203.5 222.3
Ciesco, L.P............................................ 194.9 194.9
Countrywide Funding.................................... 171.2 172.7
Baxter International................................... 168.9 168.9
Time Warner............................................ 158.6 166.1
Ford Motor Company..................................... 156.7 162.6
</TABLE>
The portfolio of debt securities at December 31, 1995 and 1994 included $662.5
million and $318.3 million, respectively, (5% and 3%, respectively, of the debt
securities) of investments that are considered "below investment grade". "Below
investment grade" securities are defined to be securities that carry a rating
below BBB-/Baa3, by Standard & Poors/ Moody's Investor Services, respectively.
The increase in below investment grade securities is the result of a change in
investment strategy, which has reduced the Company's holdings in residential
mortgage-back securities and increased the Company's holdings in corporate
securities. Residential mortgage-back securities are subject to higher
prepayment risk and lower credit risk, while corporate securities earning a
comparable yield are subject to higher credit risk and lower prepayment risk. We
expect the percentage of below investment grade securities will increase in
1996, but we expect that the overall average quality of the portfolio of debt
securities will remain at AA-. Of these below investment grade assets, $14.5
million and $31.8 million, at December 31, 1995 and 1994, respectively, were
investments that were purchased at investment grade, but whose ratings have
since been downgraded.
Included in residential mortgage-back securities are collateralized mortgage
obligations ("CMOs") with carrying values of $2.5 billion and $2.6 billion at
December 31, 1995 and 1994, respectively. The principal risks inherent in
holding CMOs are prepayment and extension risks related to dramatic decreases
and increases in interest rates whereby the CMOs would be subject to repayments
of principal earlier or later than originally anticipated. At December 31, 1995
and 1994, approximately 79% and 85%, respectively, of the Company's CMO holdings
consisted of sequential and planned amortization class debt securities which are
subject to less prepayment and extension risk than other CMO instruments. At
December 31, 1995 and 1994, approximately 81% and 82%, respectively, of the
Company's CMO holdings were collateralized by residential mortgage loans, on
which the timely payment of principal and interest was backed by specified
government agencies (e.g., GNMA, FNMA, FHLMC).
If due to declining interest rates, principal was to be repaid earlier than
originally anticipated, the Company could be affected by a decrease in
investment income due to the reinvestment of these funds at a lower interest
rate. Such prepayments may result in a duration mismatch between assets and
liabilities which could be corrected as cash from prepayments could be
reinvested at an appropriate duration to adjust the mismatch.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
Conversely, if due to increasing interest rates, principal was to be repaid
slower than originally anticipated, the Company could be affected by a decrease
in cash flow which reduces the ability to reinvest expected principal repayments
at higher interest rates. Such slower payments may result in a duration mismatch
between assets and liabilities which could be corrected as available cash flow
could be reinvested at an appropriate duration to adjust the mismatch.
At December 31, 1995 and 1994, approximately 3% and 4%, respectively, of the
Company's CMO holdings consisted of interest-only strips ("IOs") or
principal-only strips ("POs"). IOs receive payments of interest and POs receive
payments of principal on the underlying pool of mortgages. The risk inherent in
holding POs is extension risk related to dramatic increases in interest rates
whereby the future payments due on POs could be repaid much slower than
originally anticipated. The extension risks inherent in holding POs was
mitigated somewhat by offsetting positions in IOs. During dramatic increases in
interest rates, IOs would generate more future payments than originally
anticipated.
The risk inherent in holding IOs is prepayment risk related to dramatic
decreases in interest rates whereby future IO cash flows could be much less than
originally anticipated and in some cases could be less than the original cost of
the IO. The risks inherent in IOs are mitigated somewhat by holding offsetting
positions in POs. During dramatic decreases in interest rates POs would generate
future cash flows much quicker than originally anticipated.
Investments in available for sale equity securities were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------ ---------- ---------- ----------
(MILLIONS)
<S> <C> <C> <C> <C>
1995
Equity Securities................ $231.6 $ 27.2 $ 1.2 $ 257.6
------ ----- --- ----------
1994
Equity Securities................ $230.5 $ 6.5 $ 7.9 $ 229.1
------ ----- --- ----------
</TABLE>
3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS
Realized capital gains or losses are the difference between proceeds received
from investments sold or prepaid, and amortized cost. Net realized capital gains
as reflected in the Consolidated Statements of Income are after deductions for
net realized capital gains (losses) allocated to experience-rated contracts of
$61.1 million, $(29.1) million and $(54.8) million for the years ended December
31, 1995, 1994, and 1993, respectively. Net realized capital gains (losses)
allocated to experience-rated contracts are deferred and subsequently reflected
in credited rates on an amortized basis. Net unamortized gains (losses),
reflected as a component of Policyholders' Funds Left With the Company, were
$7.3 million and $(50.7) million at the end of December 31, 1995 and 1994,
respectively.
Changes to the mortgage loan valuation reserve and writedowns on debt securities
are included in net realized capital gains (losses) and amounted to $3.1
million, $1.1 million and $(98.5) million, of which $2.2 million, $0.8 million
and $(91.5) million were allocable to experience-rated contractholders, for the
years ended December 31, 1995, 1994 and 1993, respectively. The 1993 losses were
primarily related to writedowns of interest-only mortgage-backed securities to
their fair value.
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (CONTINUED)
Net realized capital gains (losses) on investments, net of amounts allocated to
experience-rated contracts, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $32.8 $ 1.0 $ 9.6
Equity securities...................................... 8.3 0.2 0.1
Mortgage loans......................................... 0.2 0.3 (0.2)
----- ----- ------
Pretax realized capital gains.......................... $41.3 $ 1.5 $ 9.5
----- ----- ------
After-tax realized capital gains....................... $25.8 $ 1.0 $ 6.2
----- ----- ------
</TABLE>
Gross gains of $44.6 million, $26.6 million and $33.3 million and gross losses
of $11.8 million, $25.6 million and $23.7 million were realized from the sales
of investments in debt securities in 1995, 1994 and 1993, respectively.
Changes in unrealized capital gains (losses), excluding changes in unrealized
capital gains (losses) related to experience-rated contracts, for the years
ended December 31, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ -------- ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $255.9 $ (242.1) $164.3
Equity securities...................................... 27.3 (13.3) 10.6
Limited partnership.................................... 1.8 (1.8) --
------ -------- ------
285.0 (257.2) 174.9
Deferred federal income taxes (See Note 6)............. (36.5) 46.3 61.2
------ -------- ------
Net change in unrealized capital gains (losses)........ $321.5 $ (303.5) $113.7
------ -------- ------
------ -------- ------
</TABLE>
Net unrealized capital gains (losses) allocable to experience-rated contracts of
$515.0 million and $104.1 million at December 31, 1995 and $(260.9) million and
$(47.7) million at December 31, 1994 are reflected on the Consolidated Balance
Sheet in Policyholders' Funds Left With the Company and Future Policy Benefits,
respectively, and are not included in shareholder's equity.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (CONTINUED)
Shareholder's equity included the following unrealized capital gains (losses),
which are net of amounts allocable to experience-rated contractholders, at
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------- -------
(MILLIONS)
<S> <C> <C> <C>
Debt securities
Gross unrealized capital gains....................... $179.3 $ 27.4 $ 164.3
Gross unrealized capital losses...................... (1.3) (105.2) --
------ ------- -------
178.0 (77.8) 164.3
Equity securities
Gross unrealized capital gains....................... 27.2 6.5 12.0
Gross unrealized capital losses...................... (1.2) (7.9) (0.1)
------ ------- -------
26.0 (1.4) 11.9
Limited Partnership
Gross unrealized capital gains....................... -- -- --
Gross unrealized capital losses...................... -- (1.8) --
------ ------- -------
Deferred federal income taxes (See Note 6)............. 71.5 108.0 61.7
------ ------- -------
Net unrealized capital gains (losses).................. $132.5 $(189.0) $ 114.5
------ ------- -------
------ ------- -------
</TABLE>
4. NET INVESTMENT INCOME
Sources of net investment income were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------ ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $ 891.5 $823.9 $828.0
Preferred stock........................................ 4.2 3.9 2.3
Investment in affiliated mutual funds.................. 14.9 5.2 2.9
Mortgage loans......................................... 1.4 1.4 1.5
Policy loans........................................... 13.7 11.5 10.8
Reinsurance loan to affiliate.......................... 46.5 51.5 53.3
Cash equivalents....................................... 38.9 29.5 16.8
Other.................................................. 8.4 6.7 7.7
-------- ------ ------
Gross investment income................................ 1,019.5 933.6 923.3
Less investment expenses............................... (15.2) (16.4) (11.4)
-------- ------ ------
Net investment income.................................. $1,004.3 $917.2 $911.9
-------- ------ ------
-------- ------ ------
</TABLE>
Net investment income includes amounts allocable to experience-rated
contractholders of $744.2 million, $677.1 million and $661.3 million for the
years ended December 31, 1995, 1994 and 1993, respectively. Interest credited to
contractholders is included in Current and Future Benefits.
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY
The Company distributed $2.9 million in the form of dividends of two of its
subsidiaries, SBA and AISI, to Aetna Retirement Services, Inc. in 1995.
The amount of dividends that may be paid to the shareholder in 1996 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$70.0 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's equity those amounts determined in
conformity with statutory accounting practices prescribed or permitted by the
Department, which differ in certain respects from generally accepted accounting
principles. Statutory net income was $70.0 million, $64.9 million and $77.6
million for the years ended December 31, 1995, 1994 and 1993, respectively.
Statutory shareholder's equity was $670.7 million and $615.0 million as of
December 31, 1995 and 1994, respectively.
At December 31, 1995 and December 31, 1994, the Company does not utilize any
statutory accounting practices which are not prescribed by insurance regulators
that, individually or in the aggregate, materially affect statutory
shareholder's equity.
6. FEDERAL INCOME TAXES
The Company is included in the consolidated federal income tax return of Aetna.
Aetna allocates to each member an amount approximating the tax it would have
incurred were it not a member of the consolidated group, and credits the member
for the use of its tax saving attributes in the consolidated return.
In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA) was enacted
which resulted in an increase in the federal corporate tax rate from 34% to 35%
retroactive to January 1, 1993. The enactment of OBRA resulted in an increase in
the deferred tax liability of $3.4 million at date of enactment, which is
included in the 1993 deferred tax expense.
Components of income tax expense (benefits) were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -------
(MILLIONS)
<S> <C> <C> <C>
Current taxes (benefits):
Income from operations............................... $82.9 $78.7 $ 87.1
Net realized capital gains........................... 28.5 (33.2) 18.1
----- ----- -------
111.4 45.5 105.2
----- ----- -------
Deferred taxes (benefits):
Income from operations............................... (14.4) (8.0) (14.2)
Net realized capital gains........................... (12.9) 33.7 (14.8)
----- ----- -------
(27.3) 25.7 (29.0)
----- ----- -------
Total................................................ $84.1 $71.2 $ 76.2
----- ----- -------
----- ----- -------
</TABLE>
F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
6. FEDERAL INCOME TAXES (CONTINUED)
Income tax expense was different from the amount computed by applying the
federal income tax rate to income before federal income taxes for the following
reasons:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
Income before federal income taxes..................... $260.0 $216.5 $219.1
Tax rate............................................... 35% 35% 35%
------ ------ ------
Application of the tax rate............................ 91.0 75.8 76.7
------ ------ ------
Tax effect of:
Excludable dividends................................. (9.3) (8.6) (8.7)
Tax reserve adjustments.............................. 3.9 2.9 4.7
Reinsurance transaction.............................. (0.5) 1.9 (0.2)
Tax rate change on deferred liabilities.............. -- -- 3.7
Other, net........................................... (1.0) (0.8) --
------ ------ ------
Income tax expense................................... $ 84.1 $ 71.2 $ 76.2
------ ------ ------
------ ------ ------
</TABLE>
The tax effects of temporary differences that give rise to deferred tax assets
and deferred tax liabilities at December 31 are presented below:
<TABLE>
<CAPTION>
1995 1994
------ ------
(MILLIONS)
<S> <C> <C>
Deferred tax assets:
Insurance reserves................................... $290.4 $211.5
Net unrealized capital losses........................ -- 136.3
Unrealized gains allocable to experience-rated
contracts........................................... 216.7 --
Investment losses not currently deductible........... 7.3 15.5
Postretirement benefits other than pensions.......... 7.7 8.4
Other................................................ 32.0 28.3
------ ------
Total gross assets..................................... 554.1 400.0
Less valuation allowance............................... -- 136.3
------ ------
Deferred tax assets, net of valuation.................. 554.1 263.7
Deferred tax liabilities:
Deferred policy acquisition costs.................... 433.0 385.2
Unrealized losses allocable to experience-rated
contracts........................................... -- 108.0
Market discount...................................... 4.4 3.6
Net unrealized capital gains......................... 288.2 --
Other................................................ (1.9) 0.4
------ ------
Total gross liabilities................................ 723.7 497.2
------ ------
Net deferred tax liability............................. $169.6 $233.5
------ ------
------ ------
</TABLE>
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
6. FEDERAL INCOME TAXES (CONTINUED)
Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes. At December 31, 1994, $81.0 million of net unrealized
capital losses were reflected in shareholder's equity without deferred tax
benefits. As of December 31, 1995, no valuation allowance was required for
unrealized capital gains and losses. The reversal of the valuation allowance had
no impact on net income in 1995.
The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that has
not been subject to taxation. As of December 31, 1983, no further additions
could be made to the Policyholders' Surplus Account for tax return purposes
under the Deficit Reduction Act of 1984. The balance in such account was
approximately $17.2 million at December 31, 1995. This amount would be taxed
only under certain conditions. No income taxes have been provided on this amount
since management believes the conditions under which such taxes would become
payable are remote.
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1986. Discussions are
being held with the Service with respect to proposed adjustments. However,
management believes there are adequate defenses against, or sufficient reserves
to provide for, such challenges. The Service has commenced its examinations for
the years 1987 through 1990.
7. BENEFIT PLANS
Employee Pension Plans--The Company, in conjunction with Aetna, has
non-contributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over sixty consecutive months of highest
earnings in a 120 month period). Contributions are determined using the
Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to the amounts that are currently deductible for tax
reporting purposes. The accumulated benefit obligation and plan assets are
recorded by Aetna. The accumulated plan assets exceed accumulated plan benefits.
There has been no funding to the plan for the years 1993 through 1995, and
therefore, no expense has been recorded by the Company.
Agent Pension Plans--The Company, in conjunction with Aetna, has a non-qualified
pension plan covering certain agents. The plan provides pension benefits based
on annual commission earnings. The accumulated plan assets exceed accumulated
plan benefits. There has been no funding to the plan for the years 1993 through
1995, and therefore, no expense has been recorded by the Company.
Employee Postretirement Benefits--In addition to providing pension benefits,
Aetna also provides certain postretirement health care and life insurance
benefits, subject to certain caps, for retired employees. Medical and dental
benefits are offered to all full-time employees retiring at age 50 with at least
15 years of service or at age 65 with at least 10 years of service. Retirees are
required to contribute to the plans based on their years of service with Aetna.
The cost to the Company associated with the Aetna postretirement plans for 1995,
1994 and 1993 were $1.4 million, $1.0 million and $0.8 million, respectively.
Agent Postretirement Benefits--The Company, in conjunction with Aetna, also
provides certain postemployment health care and life insurance benefits for
certain agents.
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
7. BENEFIT PLANS (CONTINUED)
The cost to the Company associated to the agents' postretirement plans for 1995,
1994 and 1993 were $0.8 million, $0.7 million and $0.6 million, respectively.
Incentive Savings Plan--Substantially all employees are eligible to participate
in a savings plan under which designated contributions, which may be invested in
common stock of Aetna or certain other investments, are matched, up to 5% of
compensation, by Aetna. Pretax charges to operations for the incentive savings
plan were $4.9 million, $3.3 million and $3.1 million in 1995, 1994 and 1993,
respectively.
Stock Plans--Aetna has a stock incentive plan that provides for stock options
and deferred contingent common stock or cash awards to certain key employees.
Aetna also has a stock option plan under which executive and middle management
employees of Aetna may be granted options to purchase common stock of Aetna at
the market price on the date of grant or, in connection with certain business
combinations, may be granted options to purchase common stock on different
terms. The cost to the Company associated with the Aetna stock plans for 1995,
1994 and 1993, was $6.3 million, $1.7 million and $0.4 million, respectively.
8. RELATED PARTY TRANSACTIONS
The Company is compensated by the Separate Accounts for bearing mortality and
expense risks pertaining to variable life and annuity contracts. Under the
insurance contracts, the Separate Accounts pay the Company a daily fee which, on
an annual basis, ranges, depending on the product, from .25% to 1.80% of their
average daily net assets. The Company also receives fees from the variable life
and annuity mutual funds and The Aetna Series Fund for serving as investment
adviser. Under the advisory agreements, the Funds pay the Company a daily fee
which, on an annual basis, ranges, depending on the fund, from .25% to 1.00% of
their average daily net assets. The advisory agreements also call for the
variable funds to pay their own administrative expenses and for The Aetna Series
Fund to pay certain administrative expenses. The Company also receives fees
(expressed as a percentage of the average daily net assets) from The Aetna
Series Fund for providing administration, shareholder services and promoting
sales. The amount of compensation and fees received from the Separate Accounts
and Funds, included in Charges Assessed Against Policyholders, amounted to
$128.1 million, $104.6 million and $93.6 million in 1995, 1994 and 1993,
respectively. The Company may waive advisory fees at its discretion.
The Company may, from time to time, make reimbursements to a Fund for some or
all of its operating expenses. Reimbursement arrangements may be terminated at
any time without notice.
Since 1981, all domestic individual non-participating life insurance of Aetna
and its subsidiaries has been issued by the Company. Effective December 31,
1988, the Company entered into a reinsurance agreement with Aetna Life Insurance
Company ("Aetna Life") in which substantially all of the non-participating
individual life and annuity business written by Aetna Life prior to 1981 was
assumed by the Company. A $108.0 million commission, paid by the Company to
Aetna Life in 1988, was capitalized as deferred policy acquisition costs. The
Company maintained insurance reserves of $655.5 million and $690.3 million as of
December 31, 1995 and 1994, respectively, relating to the business assumed. In
consideration for the assumption of this business, a loan was established
relating to the assets held by Aetna Life which support the insurance reserves.
The loan is being reduced in accordance with the decrease in the reserves. The
fair value of this loan was $663.5 million and $630.3 million as of December 31,
1995 and 1994, respectively, and is based upon the fair value of the underlying
assets. Premiums of $28.0 million, $32.8 million and $33.3 million and current
and future benefits of $43.0 million, $43.8 million and $55.4 million were
assumed in 1995, 1994 and 1993, respectively.
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
8. RELATED PARTY TRANSACTIONS (CONTINUED)
Investment income of $46.5 million, $51.5 million and $53.3 million was
generated from the reinsurance loan to affiliate in 1995, 1994 and 1993,
respectively. Net income of approximately $18.4 million, $25.1 million and $13.6
million resulted from this agreement in 1995, 1994 and 1993, respectively.
On December 16, 1988, the Company assumed $25.0 million of premium revenue from
Aetna Life for the purchase and administration of a life contingent single
premium variable payout annuity contract. In addition, the Company also is
responsible for administering fixed annuity payments that are made to annuitants
receiving variable payments. Reserves of $28.0 million and $24.2 million were
maintained for this contract as of December 31, 1995 and 1994, respectively.
Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement with
Aetna Life to reinsure amounts in excess of this limit, up to a maximum of $8.0
million on any new individual life business, on a yearly renewable term basis.
Premium amounts related to this agreement were $3.2 million, $1.3 million and
$0.6 million for 1995, 1994 and 1993, respectively.
The Company received no capital contributions in 1995, 1994 or 1993.
The Company distributed $2.9 million in the form of dividends of two of its
subsidiaries, SBA and AISI, to Aetna Retirement Services, Inc. in 1995.
Premiums due and other receivables include $5.7 million and $27.6 million due
from affiliates in 1995 and 1994, respectively. Other liabilities include $12.4
million and $27.9 million due to affiliates for 1995 and 1994, respectively.
Substantially all of the administrative and support functions of the Company are
provided by Aetna and its affiliates. The financial statements reflect allocated
charges for these services based upon measures appropriate for the type and
nature of service provided.
9. REINSURANCE
The Company utilizes indemnity reinsurance agreements to reduce its exposure to
large losses in all aspects of its insurance business. Such reinsurance permits
recovery of a portion of losses from reinsurers, although it does not discharge
the primary liability of the Company as direct insurer of the risks reinsured.
The Company evaluates the financial strength of potential reinsurers and
continually monitors the financial condition of reinsurers. Only those
reinsurance recoverables deemed probable of recovery are reflected as assets on
the Company's Consolidated Balance Sheets.
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
9. REINSURANCE (CONTINUED)
The following table includes premium amounts ceded/assumed to/from affiliated
companies as discussed in Note 8 above.
<TABLE>
<CAPTION>
CEDED TO ASSUMED
DIRECT OTHER FROM OTHER
AMOUNT COMPANIES COMPANIES
--------- ------------- -------------
(MILLIONS)
<S> <C> <C> <C>
1995
Premiums:
Life Insurance.................................................................. $ 28.8 $ 8.6 $ 28.0
Accident and Health Insurance................................................... 7.5 7.5 --
Annuities....................................................................... 82.1 -- 0.5
--------- ----- -----
Total earned premiums........................................................... $ 118.4 $ 16.1 $ 28.5
--------- ----- -----
--------- ----- -----
1994
Premiums:
Life Insurance.................................................................. $ 27.3 $ 6.0 $ 32.8
Accident and Health Insurance................................................... 9.3 9.3 --
Annuities....................................................................... 69.9 -- 0.2
--------- ----- -----
Total earned premiums........................................................... $ 106.5 $ 15.3 $ 33.0
--------- ----- -----
--------- ----- -----
1993
Premiums:
Life Insurance.................................................................. $ 22.4 $ 5.6 $ 33.3
Accident and Health Insurance................................................... 12.9 12.9 --
Annuities....................................................................... 31.3 -- 0.7
--------- ----- -----
Total earned premiums........................................................... $ 66.6 $ 18.5 $ 34.0
--------- ----- -----
--------- ----- -----
<CAPTION>
NET
AMOUNT
---------
<S> <C>
1995
Premiums:
Life Insurance.................................................................. $ 48.2
Accident and Health Insurance................................................... --
Annuities....................................................................... 82.6
---------
Total earned premiums........................................................... $ 130.8
---------
---------
1994
Premiums:
Life Insurance.................................................................. $ 54.1
Accident and Health Insurance................................................... --
Annuities....................................................................... 70.1
---------
Total earned premiums........................................................... $ 124.2
---------
---------
1993
Premiums:
Life Insurance.................................................................. $ 50.1
Accident and Health Insurance................................................... --
Annuities....................................................................... 32.0
---------
Total earned premiums........................................................... $ 82.1
---------
---------
</TABLE>
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
10. FINANCIAL INSTRUMENTS
ESTIMATED FAIR VALUE
The carrying values and estimated fair values of the Company's financial
instruments at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents................................. $ 568.8 $ 568.8 $ 623.3 $ 623.3
Short-term investments.................................... 15.1 15.1 98.0 98.0
Debt securities........................................... 12,720.8 12,720.8 10,191.4 10,191.4
Equity securities......................................... 257.6 257.6 229.1 229.1
Limited partnership....................................... -- -- 24.4 24.4
Mortgage loans............................................ 21.2 21.9 9.9 9.9
Liabilities:
Investment contract liabilities:
With a fixed maturity................................... 989.1 1,001.2 826.7 833.5
Without a fixed maturity................................ 9,511.0 9,298.4 8,122.6 7,918.2
</TABLE>
Fair value estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument, such as
estimates of timing and amount of expected future cash flows. Such estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Company's entire holdings of a particular financial instrument, nor
do they consider the tax impact of the realization of unrealized gains or
losses. In many cases, the fair value estimates cannot be substantiated by
comparison to independent markets, nor can the disclosed value be realized in
immediate settlement of the instrument. In evaluating the Company's management
of interest rate and liquidity risk, the fair values of all assets and
liabilities should be taken into consideration, not only those above.
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
SHORT-TERM INSTRUMENTS: Fair values are based on quoted market prices or dealer
quotations. Where quoted market prices are not available, the carrying amounts
reported in the Consolidated Balance Sheets approximates fair value. Short-term
instruments have a maturity date of one year or less and include cash and cash
equivalents, and short-term investments.
DEBT AND EQUITY SECURITIES: Fair values are based on quoted market prices or
dealer quotations. Where quoted market prices or dealer quotations are not
available, fair value is estimated by using quoted market prices for similar
securities or discounted cash flow methods.
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
10. FINANCIAL INSTRUMENTS (CONTINUED)
MORTGAGE LOANS: Fair value is estimated by discounting expected mortgage loan
cash flows at market rates which reflect the rates at which similar loans would
be made to similar borrowers. The rates reflect management's assessment of the
credit quality and the remaining duration of the loans. The fair value estimate
of mortgage loans of lower quality, including problem and restructured loans, is
based on the estimated fair value of the underlying collateral.
INVESTMENT CONTRACT LIABILITIES (INCLUDED IN POLICYHOLDERS' FUNDS LEFT WITH THE
COMPANY):
WITH A FIXED MATURITY: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
WITHOUT A FIXED MATURITY: Fair value is estimated as the amount payable to the
contractholder upon demand. However, the Company has the right under such
contracts to delay payment of withdrawals which may ultimately result in paying
an amount different than that determined to be payable on demand.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS (INCLUDING DERIVATIVE FINANCIAL
INSTRUMENTS)
During 1995, the Company received $0.4 million for writing call options on
underlying securities. As of December 31, 1995 there were no option contracts
outstanding.
At December 31, 1995, the Company had a forward swap agreement with a notional
amount of $100.0 million and a fair value of $0.1 million.
The Company did not have transactions in derivative instruments in 1994.
The Company also holds investments in certain debt and equity securities with
derivative characteristics (i.e., including the fact that their market value is
at least partially determined by, among other things, levels of or changes in
interest rates, prepayment rates, equity markets or credit ratings/spreads). The
amortized cost and fair value of these securities, included in the $13.4 billion
investment portfolio, as of December 31, 1995 was as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
(MILLIONS) COST VALUE
----------- -----------
<S> <C> <C>
Collateralized mortgage obligations..................................................................... $ 2,383.9 $ 2,549.3
Principal-only strips (included above).................................................................. 38.7 50.0
Interest-only strips (included above)................................................................... 10.7 20.7
Structured Notes (1).................................................................................... 95.0 100.3
</TABLE>
(1) Represents non-leveraged instruments whose fair values and credit risk are
based on underlying securities, including fixed income securities and
interest rate swap agreements.
11. COMMITMENTS AND CONTINGENT LIABILITIES
COMMITMENTS
Through the normal course of investment operations, the Company commits to
either purchase or sell securities or money market instruments at a specified
future date and at a specified price or yield. The inability of counterparties
to honor these commitments may result in either higher or lower replacement
cost. Also, there is likely to be a change in
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
11. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
the value of the securities underlying the commitments. At December 31, 1995,
the Company had commitments to purchase investments of $31.4 million. The fair
value of the investments at December 31, 1995 approximated $31.5 million. There
were no outstanding forward commitments at December 31, 1994.
LITIGATION
There were no material legal proceedings pending against the Company as of
December 31, 1995 or December 31, 1994 which were beyond the ordinary course of
business. The Company is involved in lawsuits arising, for the most part, in the
ordinary course of its business operations as an insurer.
12. SEGMENT INFORMATION
The Company's operations are reported through two major business segments: Life
Insurance and Financial Services.
Summarized financial information for the Company's principal operations was as
follows:
<TABLE>
<CAPTION>
(MILLIONS) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Financial services..................................................................... $ 1,129.4 $ 946.1 $ 892.8
Life insurance......................................................................... 407.9 386.1 371.7
----------- ----------- -----------
Total revenue.......................................................................... $ 1,537.3 $ 1,332.2 $ 1,264.5
----------- ----------- -----------
Income before federal income taxes:
Financial services..................................................................... $ 158.0 $ 119.7 $ 121.1
Life insurance......................................................................... 102.0 96.8 98.0
----------- ----------- -----------
Total income before federal income taxes............................................... $ 260.0 $ 216.5 $ 219.1
----------- ----------- -----------
Net income:
Financial services..................................................................... $ 113.8 $ 85.5 $ 86.8
Life insurance......................................................................... 62.1 59.8 56.1
----------- ----------- -----------
Net income............................................................................... $ 175.9 $ 145.3 $ 142.9
----------- ----------- -----------
Assets under management, at fair value:
Financial services..................................................................... $ 23,224.3 $ 17,785.2 $ 16,600.5
Life insurance......................................................................... 2,698.1 2,171.7 2,175.5
----------- ----------- -----------
Total assets under management.......................................................... $ 25,922.4 $ 19,956.9 $ 18,776.0
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-26
<PAGE>
VARIABLE ANNUITY ACCOUNT C
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account C:
- Independent Auditors' Report
- Statement of Assets and Liabilities as of December 31, 1995
- Statement of Operations for the year ended December 31, 1995
- Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
- Notes to Financial Statements
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993
- Consolidated Balance Sheets as of December 31, 1995 and 1994
- Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1995, 1994 and 1993
- Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance and
Annuity Company establishing Variable Annuity Account C
(2) Not applicable
(3.1) Form of Broker-Dealer Agreement
(3.2) Alternative Form of Wholesaling Agreement and related Selling
Agreement
(4.1) Form of Variable Annuity Contract (G-CDA-IA(RP))
(4.2) Form of Variable Annuity Contract (G-CDA-IA(RPM/XC))
(4.3) Form of Variable Annuity Contract (G-CDA-HF)(1)
(5) Form of Variable Annuity Contract Application (300-GTD-IA)(2)
(6) Certification of Incorporation and By-Laws of Depositor(3)
(7) Not applicable
(8.1) Fund Participation Agreement (Amended and Restated) between
Aetna Life Insurance and Annuity Company, Alger American Fund
and Fred Alger Management, Inc. dated March 31, 1995
(8.2) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Calvert Asset Management Company (Calvert
Responsibly Invested Balanced
<PAGE>
Portfolio formerly Calvert Socially Responsible Series) dated
March 13, 1989 and amended December 27, 1993
(8.3) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Fidelity Distributors Corporation
(Variable Insurance Products Fund) dated February 1, 1994 and
amended March 1, 1996
(8.4) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Fidelity Distributors Corporation
(Variable Insurance Products Fund II) dated February 1, 1994
and amended March 1, 1996
(8.5) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Franklin Advisers, Inc. dated January 31,
1989
(8.6) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Janus Aspen Series dated April 19, 1994
and amended March 1, 1996
(8.7) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Lexington Management Corporation regarding
Natural Resources Trust dated December 1, 1988 and amended
February 11, 1991
(8.8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Advisers Management Trust (now Neuberger &
Berman Advisers Management Trust) dated April 14, 1989 and as
assigned and modified on May 1, 1995
(8.9) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Scudder Variable Life Investment Fund
dated April 27, 1992 and amended February 19, 1993 and August
13, 1993
(8.10) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Investors Research Corporation and TCI
Portfolios, Inc. dated July 29, 1992 and amended December 22,
1992 and June 1, 1994
(9) Opinion of Counsel(4)
(10.1) Consent of Independent Auditors
(10.2) Consent of Counsel
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Data(5)
(14) Not applicable
(15.1) Powers of Attorney (6)
(15.2) Authorization for Signatures
(27) Financial Data Schedule
1. Incorporated by reference to Post-Effective Amendment No. 3 to
Registration Statement on Form N-4 (File No. 33-75964), as filed on
February 24, 1995.
2. Incorporated by reference to Post-Effective Amendment No. 60 to
Registration Statement on Form N-4 (File No. 2-52449), as filed on
February 24, 1995.
3. Incorporated by reference to Post-Effective Amendment No. 58 to
Registration Statement on Form N-4 (File No. 2-52449), as filed on
February 28, 1994.
<PAGE>
4. Incorporated by reference to Registrant's 24f-2 Notice for fiscal year
ended December 31, 1995, as filed electronically on February 29, 1996.
5. Incorporated by reference to Post-Effective Amendment No. 4 to
Registration Statement on Form N-4 (File No. 33-75964), as filed on
April 28, 1995.
6. Incorporated by reference to Post-Effective Amendment No. 3 to
Registration Statement on Form N-4 (File No. 33-75974), as filed
electronically on April 9, 1996.
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
Name and Principal
Business Address* Positions and Offices with Depositor
- ------------------ ------------------------------------
<S> <C>
Daniel P. Kearney Director and President
Timothy A. Holt Director, Senior Vice President and
Chief Financial Officer
Christopher J. Burns Director and Senior Vice President
Laura R. Estes Director and Senior Vice President
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Vice President
Glen Salow Director and Vice President
Creed R. Terry Director and Vice President
Eugene M. Trovato Vice President and Treasurer,
Corporate Controller
Zoe Baird Senior Vice President and General
Counsel
Diane Horn Vice President and Chief Compliance
Officer
Susan E. Schechter Corporate Secretary and Counsel
</TABLE>
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Attached hereto is a diagram of all persons directly or indirectly under
common control with the Registrant. The diagram indicates the percentage of
voting securities (rights) owned and, in parenthesis after the company 's
name, the state or other sovereign power under the laws of which the company
is organized.
<PAGE>
<TABLE>
As of April 10, 1996
Page 1
AETNA
LIFE AND
CASUALTY
COMPANY
(1) (Connecticut)
|
<S> <C> |
|-----------------------|-----------------|---------------------|----------------------|
| | | | |
100% 100% | 100% 100%
| | | | |
AETNA THE | AETNA AETNA
LIFE STANDARD | RETIREMENT CANADA
INSURANCE FIRE | SERVICES, INC. HOLDINGS
COMPANY INSURANCE | LIMITED
COMPANY |
|
(1) (Connecticut) (a) (1) (Connecticut) (a) | (1) (Connecticut) (a) (1) (Canada) (a)
| | | | |
See See | See See
Supplement Supplement | Supplement Supplement
#2 #3 | #4 #5
|
|
|----------------------------------------|-------------------------------------------|
100% | 100%
| | |
AETNA | AETNA
INTERNATIONAL, | INTERNATIONAL
INC. | (N.Z.)
| LIMITED
|
(1) (Connecticut) (a) | (1)(New Zealand)(a)
| | |
| | |
See | See
Supplement | Supplement
#6 | #7
|
SEE
(1) Corporation (a) Fully Consolidated PAGE
(2) Partnership (b) One Line Consolidation 2
(3) Joint Venture (c) Not Consolidated
(4) Lloyds Association
(5) Trust
(6) Limited Liability Company
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
As of April 10, 1996 Page 2
AETNA
LIFE AND
CASUALTY
COMPANY
(1) (Connecticut)
<S> <C> |
|-----------------------|----------------------|-------------------|------------------|-----------------------|
| | | | | |
100% 100% 100% | 100% 100%
| | | | | |
AETNA LIFE ACS ACS | LUETTGENS AE
INSURANCE FINANCIAL PORTFOLIO | LIMITED HOUSING
COMPANY SERVICES, SERVICES, | CORP.
OF ILLINOIS INC. INC. |
|
|
(1) (Illinois) (a) (1) (Connecticut) (a) (1) (Delaware) (a) | (1) (Connecticut) (a) (1) (Connecticut) (a)
| |
| |
|-----------------------| |------------------|------------------------------------------|
| | | | |
100% 99%* 100% | 100%
| | | | |
AETNA GATEWAY STRUCTURED | AETNA LIFE &
GATEWAY ONE BENEFITS, | CASUALTY
OF L.L.C. INC. | INTERNATIONAL
ILLINOIS -1%- | FINANCE N.V.
INC. | (1) (Netherlands
(1) (Delaware) (a) (6) (Delaware) (b) (1) (Connecticut) (a) | Antilles) (a)
| |--------------------| |
| | | |
100% | 95%** 100%
| | | |
STRUCTURED | AETNA AETNA
BENEFITS | CAPITAL (NETHERLANDS)
OF FLORIDA, | L.L.C. HOLDINGS
INC. | B.V.
SEE
(1) (Florida) (b) PAGE (6) (Delaware) (a) (1)(Netherlands) (b)
3
(1) Corporation (a) Fully Consolidated
(2) Partnership (b) One Line Consolidation Percentages are rounded to the nearest whole percent and are based on
(3) Joint Venture (c) Not Consolidated ownership of voting rights.
(4) Lloyds Association
(5) Trust * Aetna Gateway of Illinois Inc. owns 1% of this Limited Liability
(6) Limited Liability Company Company.
** Aetna Capital Holdings, Inc. (see Supplement 6a) owns 5% of this
Limited Liability Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 Page 3
AETNA
LIFE AND
CASUALTY
COMPANY
<S> <C> (1) (Connecticut)
|-----------------------|---------------------|---------------|-----------|------------------|--------------------|
| | | | | | |
100% 100% 100% * | 100% 100% 100%
| | | | | | |
SPAN DATA 5TH AETNA | AE FOUR AE TEN, AE FIFTEEN,
PROCESSING GENERATION, FOUNDATION, | INCORPORATED INCORPORATED INCORPORATED
CENTER, INC. INC. |
INC. |
|
(1)(Connecticut)(a) (1) (Massachusetts) (a) (1)(Connecticut)(c) | (1)(Connecticut)(a) (1)(Connecticut)(a) (1)(Connecticut)(a)
|
|
|--------------------------------------|-----------------------------|
| | |
99% *** | 100%
| |
ARCELIA SEE AETNA
LIMITED PAGE REALTY
4 INVESTMENTS I,
INC.
(1)(Hong Kong)(a) (1)(Connecticut)(a)
|
|
84%**
AETNA
PROPERTIES I
LIMITED
PARTNERSHIP
(2)(Connecticut)(c)
(1) Corporation (a) Fully Consolidated * Nonstock Corporation
(2) Partnership (b) One Line Consolidation ** Aetna Realty Investments I, Inc. is a 1% general
(3) Joint Venture (c) Not Consolidated partner and a 83% limited partner.
(4) Lloyds Association *** Aetna International Inc. owns 1% of Percentages are rounded to the
(5) Trust this company. nearest whole percent and are
(6) Limited Liability Company based on ownership of voting
rights.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996
AETNA Page 4
LIFE AND
CASUALTY
COMPANY
(1) (Connecticut)
|
<S> <C> -----------------------------------------------------------------
| | |
100% 20% 100%
| | |
AETNA CONSULTORES AETNA
INVESTMENT DE RE-INSURANCE
MANAGEMENT PENSIONES COMPANY
(F.E.) HOLDINGS S.R.L. (U.K.) LTD.
LIMITED
(1) (United
(1) (Hong Kong) (a) (1) (SPAIN) (b) Kingdom) (a)
|
|
---------------------------------------------------------------------------------------
| | | | |
100% 100% 100% 100% 14%
| | | | |
PLJ AETNA AETNA AETNA KWANG HUA
HOLDINGS INVESTMENT FUND INVESTMENT SECURITIES
LIMITED MANAGEMENT MANAGERS MANAGEMENT INVESTMENT
(F.E.)LIMITED (F.E.) LIMITED (F.E.) NOMINEES & TRUST Co.
LIMITED LTD.
(1) (Hong Kong) (a) (1) (Hong Kong) (a) (1) (Hong Kong) (a) (1) (Hong Kong) (a) (1) (Taiwan) (b)
(1) Corporation (a) Fully Consolidated
(2) Partnership (b) One Line Consolidation
(3) Joint Venture (c) Not Consolidated
(4) Lloyds Association Percentages are rounded to the nearest whole percent
(5) Trust and are based on ownership of voting rights.
(6) Limited Liability Company
</TABLE>
<PAGE>
<TABLE>
As of April 10, 1996 Supplement #2
AETNA
LIFE
INSURANCE
COMPANY
<S> <C> (1)(Connecticut)(a)
|
--------------------------------------------------------------------------|
| | | |
100% 100% 100% |
| | | |
AETNA ALIC AETNA |
REAL ESTATE ENERGY, CASUALTY |
PROPERTIES, CO. COMPANY |
INC. |
(1)(Connecticut)(a) (1)(Texas)(a) (1)(Connecticut)(a) |
|
|
-------------------------------------------------------------------------------------------------|
| | | | |
100% 100% 70% 13% *** |
| | | | |
AETNA HUMAN BAYSHORE AETNA |
LIFE AFFAIRS HEIGHTS INSTITUTIONAL |
ASSIGNMENT INTERNATIONAL, ASSOCIATES INVESTORS I |
COMPANY INCORPORATED LIMITED |
PARTNERSHIP |
(1)(Connecticut)(a) (1)(Utah)(a) (2)(Florida)(b) (2)(Connecticut)(b) |
|
-------------------------------------------------------------------------------------------------|
| | | | |
100% 100% 62% 75% * |
| | | | |
HUMAN HUMAN AETNA F-L |
AFFAIRS AFFAIRS HAMILTON PROPERTIES |
OF ALASKA, INTERNATIONAL PARTNERSHIP |
INC. OF CALIFORNIA |
|
(1) (Alaska) (a) (1) (California) (a) (2) (Illinois) (b) (2)(Connecticut(b) |
|
See
Supplement
#2a
<CAPTION>
* The Aetna Casualty and Surety Company is a 25% general partner.
** 89% general partner and 1% limited partner. Percentages are rounded to the nearest whole percent
*** Aetna Real Estate Properties, Inc. is a 1% general partner. and are based on ownership of voting rights.
</TABLE>
<TABLE>
<CAPTION>
As of June 30, 1995 Supplement #2
AETNA
LIFE
INSURANCE
COMPANY
(1)(Connecticut)(a)
<S><C> |
|--------------------------------------------------------------
| | |
| 100% 100%
| | |
| AETNA AE
| LIFE & FOURTEEN,
| CASUALTY INC.
| (BERMUDA)
| LTD.
| (1)(Bermuda)(a) (1)(Connecticut)(a)
|
|
|-------------------------------------------------------------------
| | | |
| 70% 80% 50%
| | | |
| SHADOW SHADOW RIDGE CAPITOL DISTRICT
| OAKS AT OAK PARK ENERGY CENTER
| CONDOMINIUM COGENERATION
| ASSOCIATES ASSOCIATES
|
| (2)(California)(b) (2)(California)(b) (2)(Connecticut)(b)
|
|-------------------------------------------------------------------
| | |
100% 100% 90%**
| | |
AELTUS AHP 455
INVESTMENT HOLDINGS, . MARKET
MANAGEMENT, INC. STREET
INC.
(1)(Connecticut)(a) (1)(Connecticut)(a) (2)(California)(b)
| |
| |
| |
See See
Supplement Supplement
#2e #2f
* The Aetna Casualty and Surety Company is a 25% general partner.
** 89% general partner and 1% limited partner. Percentages are rounded to the nearest whole percent
*** Aetna Real Estate Properties, Inc. is a 1% general partner. and are based on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
As of April 10, 1996 AETNA Supplement #2a
LIFE
INSURANCE
COMPANY
(1)(Connecticut)(a)
|
<S><C> |
-----------------------------------------------------------------------------------------------------------------
| | | | | | |
50% * 50% * 49% ** 49% ** | 49% ** 50%*
| | | | | | |
FRIDAY KOLL KOLL KOLL | KOLL KOLL
ASSOCIATES CENTER CENTER CENTER | CENTER CENTER
NEWPORT A NEWPORT NEWPORT | NEWPORT NEWPORT
NUMBER 1 NUMBER 2 | NUMBER 7 NUMBER 8
|
(2)(California)(b) (2)(California)(b) (2)(California)(b) (2)(California)(b) | (2)(California)(b) (2)(California)(b)
|
-----------------------------------------------------------------------------|-----------------------------------
| | | | | | |
50% * 50% * 50% * 60% | 60% *** 99%****
| | | | | | |
KOLL KOLL KOLL KOLL | KOLL WATERLOO
CENTER CENTER CENTER CENTER | CENTER ASSOCIATES
NEWPORT NEWPORT NEWPORT NEWPORT | NEWPORT LIMITED
NUMBER 9 NUMBER 10 NUMBER 11 NUMBER 14 | NUMBER 15 PARTNERSHIP
| (2) (North
(2)(California)(b) (2)(California)(b) (2)(California)(b) (2)(California)(b) | (2)(California)(b) Carolina)(b)
|
-----------------------------------------------------------------------------|-----------------------------------
| | | | | | |
99% 60% 50% 60% | 68% 99%
| | | | | | |
HAYWARD GABLES GABLES COUNTRY CLUB | BIRTCHER HARBOR
INDUSTRIAL AT AT HEIGHTS AT | AETNA- BUSINESS
PARK FARMINGTON BRIGHTON WOBURN | LAGUNA PARK
ASSOCIATES ASSOCIATES ASSOCIATES ASSOCIATES | HILLS
|
(2)(Connecticut)(b) (2)(Connecticut)(b) (2)(New York)(b) (2)(Massachusetts)(b) | (2)(California)(b) (2)(California)(b)
|
|
See
Supplement
#2b
* Aetna Life Insurance Company is a 49% general partner and a 1% limited partner.
** Aetna Life Insurance Company is a 49% limited partner and A.E. Properties is a 1%
general partner.
*** Aetna Life Insurance Company is a 59% general partner and a 1% limited partner. Percentages are rounded to the nearest whole
**** Aetna Life Insurance Company is a 99% general partner and Trumbull percent and are based on ownership of voting
Three, Inc. is a 1% limited partner. rights.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 AETNA Supplement #2b
LIFE
INSURANCE
COMPANY
(1)(Connecticut)(a)
<S><C> |
--------------------------------------------------------------------------------------------------------------------
| | | | | | | |
99%* 100% 99%* 99%* | 80% 80% 75%
| | | | | | | |
ENSENADA TREVOSE OAKS OAKS | KBC-RED KBC- C.R.I.
DE LAS HOSPITALITY, AT AT | HILL EASTSIDE HOTEL
COLINAS I INC. VALLEY VALLEY | LIMITED LIMITED ASSOCIATES,
ASSOCIATES RANCH I RANCH II | PARTNERSHIP PARTNERSHIP L.P.
|
(2)(Texas)(b) (1)(Connecticut)(b) (2)(Texas)(b) (2)(Texas)(b) | (2)(California)(b) (2)(Arizona)(b) (2)(Iowa)(b)
|
|
-------------------------------------------------------------------------------------------------------------------
| | | | | | | |
100% 100% 100% 100% | 84%**** 99%*** 60%
| | | | | | | |
TRUMBULL TRUMBULL TRUMBULL TRUMBULL | CENTURY SOUTHFIELD LINCOLN
ONE, TWO, THREE, FOUR, | CITY PARTNERS RANCHO
INC. INC. INC. INC. | NORTH CUCAMONGA
| L.L.C. ASSOCIATES
|
(1)(Connecticut)(a) (1)(Connecticut)(a) (1)(Connecticut)(a) (1)(Connecticut)(a)|(6)(Delaware)(b) (2)(Maryland)(b) (2)(California)(b)
|
|-------------------------
| |
| 99%**
| |
See VILLAGE
Supplement GREEN OF
#2c MADISON
HEIGHTS
(2)(Michigan)(b)
* Aetna Life Insurance Company is a 99% general partner and Trumbull One, Inc. is a 1% limited partner.
** Aetna Life Insurance Company is a 99% general partner and Trumbull Three, Inc. is a 1% limited partner.
*** Aetna Life Insurance Company is a 99% general partner and Trumbull Four, Inc. is a 1% limited partner.
**** Aetna Life Insurance Company of Illinois owns 16% of this limited liability company.
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
As of April 10, 1996 Supplement #2c
AETNA
LIFE
INSURANCE
COMPANY
<S><C> (1)(Connecticut)(a)
|
------------------------------------------------------|---------------------------------------------------------
| | | | | | |
65% 50% 60% | 75% 99%* 50%
| | | | | | |
CENTRUM TRI-CITY SOUTHWEST | B&H CHAMPIONS CHRIS-TOWN
ASSOCIATES MALL FINANCIAL | VENTURES IV RICHLAND VILLAGE
ASSOCIATES CENTER | LIMITED NORTHCOURTE ASSOCIATES
ASSOCIATES | PARTNERSHIP PARTNERSHIP
|
(2)(California)(b) (2)(Arizona)(b) (2)(Arizona)(b) | (2)(Connecticut)(b) (2)(Texas)(a) (2)(Arizona)(b)
|
-----------------|----------------------------------------------------------
| | | | |
60% | 50% 99% 50%
| |
WOODSIDE | SPECTRUM FORGE CAMBRIDGESIDE
TERRACE | FASHION PARK GALLERIA
PARTNERS | CENTER ASSOCIATES
|
|
(2)(California)(b) | (2)(Arizona)(b) (2)(Massachusetts)(b) (2)(Massachusetts)(b)
|
|
See
Supplement
#2d
* Aetna Life Insurance Company is a 99% general partner and
Trumbull One, Inc., is a 1% limited partner.
Percentages are rounded to the nearest whole percent and are
based on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
As of April 10, 1996 Supplement #2d
AETNA
LIFE
INSURANCE
COMPANY
(1)(Connecticut)(a)
<S><C> |
--------------------------------------------------------------|---------------------------------------------------
| | | | | | | |
99%*** 30% 99% 99%*** | 99%*** 85% * 25%
| | | | | | | |
GOLF ADBI MARRIOTT TCR | FAIRWAY 1501 THACE
COURSE PARTNERSHIP INNER VENTANJA | PARTNERS FOURTH AVE. ASSOCIATES
VIEW HARBOR LIMITED | LIMITED
PARTNERSHIP HOTEL PARTNERSHIP | PARTNERSHIP
|
(2)(Maryland)(b) (2)(Florida)(b) (2)(Maryland)(a) (2)(Texas)(b) | (2)(Maryland)(b) (2)(Washington)(b) (2)(Michigan)(b)
|
--------------------------------------------------------------|--------------------------------------------------
| | | | | | | |
99% *** 99% ** 80% 99% ** | 99%**** 100% 99%****
| | | | | | | |
LINCOLN EASTMEADOW ARB-DTC EASTMEADOW | AZALEA SOUTHEAST MENLO
LOS PADRES DISTRIBUTION LTD. DISTRIBUTION | MALL, SECOND ONE,
CENTER PARTNERSHIP CENTER PHASE | L.L.C. AVENUE, L.L.C.
LIMITED II LIMITED | INC.
PARTNERSHIP PARTNERSHIP |
(2)(California)(b) (2)(Georgia)(b) (2)(Colorado)(b) (2)(Georgia)(b) | (6)(Delaware)(b) (1)(Delaware)(a) (6)(Delaware)(b)
* Aetna Life Insurance Company is a 84% general partner and a 1% limited partner.
** Aetna Life Insurance Company is a 98% general partner and a 1% limited partner.
*** Aetna Life Insurance Company is a 99% general partner and Trumbull Two, Inc.,
is a 1% limited partner. Percentages are rounded to the nearest whole
**** Southeast Second Avenue, Inc. owns 1% of these limited liability companies. percent and are based on ownership of voting
rights.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 Supplement #2e
AELTUS
INVESTMENT
MANAGEMENT
INC.
(1)(Connecticut)(a)
|
<S><C>
--------------------------------------------------------------------------------------
| | | |
100% 100% 35% 100%
| | | |
AETNA AELTUS SMITH AETNA
INVESTMENT CAPITAL, WHILEY REALTY
MANAGEMENT INC. & INVESTORS,
(BERMUDA) COMPANY INC.
HOLDINGS LIMITED
(1) (Bermuda) (a) (1) (Connecticut) (a) (1) (Delaware) (b) (1)(Delaware)(a)
|
--------------------------------------------------------------------------------------------------------------
| | | | | |
100% 100% 100% 100% 100% 35%
| | | | | |
AETNA AETNA AELTUS AETNA AETNA CHINA
INVESTMENT INVESTMENT INVESTMENT INVESTMENT FINANCIAL DYNAMIC
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT SERVICES INVESTMENT
(B.V.I.) NOMINEES (HONG KONG) INTERNATIONAL (S'PORE) LIMITED MANAGEMENT
LIMITED LIMITED (FE) LIMITED PTE LTD. (HONG KONG)
LIMITED
(1) (British
Virgin Islands)(a) (1)(Bermuda)(a) (1)(Hong Kong)(a) (1)(Singapore)(a) (1)(Australia)(a) (1)(Hong Kong)(b)
|
100%
|
AETNA FUNDS
MANAGEMENT
(AUSTRALIA)
LIMITED
(1)(Australia)(a)
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 Supplement #2f
AHP
HOLDINGS,
INC.
<S><C> (1)(Connecticut)(a)
---------------------------------------------------------|------------------------------------------------------
| | | | | | |
100% 100% 100% | 100% 100% 100%
| | | | | | |
AETNA AETNA AETNA | INFORMED AETNA AETNA
HEALTH DENTAL HEALTH | HEALTH, HEALTH HEALTH
PLANS OF CARE OF PLANS OF | INC. PLANS OF PLANS OF
OHIO, INC. CALIFORNIA, FLORIDA, | TENNESSEE, INC. GEORGIA,
INC. INC. | INC.
(1)(Ohio)(a) (1)(California)(a) (1)(Florida)(a) | (1)(Delaware)(a) (1)(Tennessee)(a) (1)(Georgia)(a)
|
---------------------------------------------------------|------------------------------------------------------
| | | | | | |
100% 81% 100% | 100% 100% 100%
| | | | | | |
AETNA PARTNERS AETNA | HEALTHWAYS AETNA AETNA
HEALTH HEALTH PLAN DENTAL | SYSTEMS, HEALTH PLANS HEALTH PLANS
MANAGEMENT, OF CARE OF | INC. OF THE OF THE
INC. PENNSLYVANIA, NEW JERSEY, | MID-ATLANTIC, CAROLINAS,
INC. INC. | INC. INC.
(1)(Delaware)(a) (1)(Pennsylvania)(a) (1)(Delaware)(a) | (1)(Delaware)(a) (1)(Virginia)(a) (1)(North Carolina)(a)
| | | |
| |--------------------- | |
| | | | |
See | | | |
Supplement 100% 100% | See
#2h | Supplement
AETNA PHYSICIANS | #2i
HEALTH PLANS HEALTH |
OF WESTERN PLAN |
PENNSYLVANIA, PREFERRED, INC. |
INC. |
(1)(Pennsylvania)(a) (1)(Pennsylvania)(a) |
|
See
Supplement
#2g
Percentages are rounded to the nearest whole percent and
are based on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 Supplement #2g
AHP
HOLDINGS,
INC.
(1) (Connecticut) (a)
<S><C> |
-------------------------------------------------------------------------------------------------------------
| | | | | |
55% 100% 100% | 100% 100%
| | | | | |
PHPSNE AETNA AETNA | AETNA AETNA
PARENT HEALTH DENTAL CARE | HEALTH DENTAL CARE
CORPORATION PLANS OF OF TEXAS, | PLANS OF OF
ARIZONA, INC. | ILLINOIS, KENTUCKY,
INC. | INC. INC.
|
(1) (Delaware) (a) (1) (Arizona) (a) (1) (Texas) | (a)(1)(Illinois) (a) (1)(Kentucky)(a)
| |
| |
100% |
| |
AETNA |
HEALTH PLANS -----------------------------------------------------------------------------------
OF SOUTHERN 100% 100% | 100% 100%
NEW ENGLAND, | | | | |
INC. AETNA HEALTH AETNA | AETNA AETNA
(1) (Connecticut) (a) PLANS OF CENTRAL HEALTH | HEALTH PROFESSIONAL
AND EASTERN PLANS OF | PLANS OF MANAGEMENT
PENNSYLVANIA, INC. TEXAS, INC. | LOUISIANA, CORPORATION
| INC.
(1) (Pennsylvania) (a) (1) (Texas) (a) | (1) (Louisiana) (a) (1) (Connecticut) (a)
| | |
| ------------------------------------ |
100% 55% 100% 100%
| | | |
FREEDOM MED AHP WMC
CHOICE, SOUTHWEST, SAN DIEGO TRANSITION
INC. INC. HOLDINGS, CORPORATION
| INC.
|
(1) (Pennsylvania) (a) (1) (Texas) (a) (1) (California) (a) (1) (Illinois) (a)
See
Supplement Percentages are rounded to the nearest whole
#2j percent and are based on ownership of voting
rights.
</TABLE>
<PAGE>
<TABLE>
As of April 10, 1996 Supplement #2h
AETNA
HEALTH
MANAGEMENT,
INC.
(1) (Delaware) (a)
|
|
100%
|
|
PARTNERS
ACQUISITION
COMPANY,
INC.
(1)(Delaware) (a)
|
<S><C> |
-----------------------------------------
| |
| |
100% 100%
| |
| |
AETNA AETNA
GOVERNMENT HEALTH
HEALTH PLANS, PLANS OF
INC. CALIFORNIA, INC.
(1) (California) (a) (1) (California) (a)
</TABLE>
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
<PAGE>
As of April 10, 1996 Supplement #2j
<TABLE>
HEALTHWAYS
SYSTEMS.
INC.
(1) (Delaware) (a)
|
<S><C> |
----------------------------------------
| |
| |
100% 100%
| |
AETNA AETNA
HEALTH HEALTH
PLANS OF PLANS OF
NEW YORK NEW JERSEY,
INC. INC.
(1)(New York)(a) (1)(New Jersey)(a)
</TABLE>
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
<PAGE>
As of April 10, 1996 Supplement #2j
<TABLE>
MED
SOUTHWEST,
INC.
(1) (Texas) (a)
|
|
<S><C> ----------------------------------------
| |
| |
100% 100%
| |
SOUTHWEST AETNA
PHYSICIANS HEALTH PLANS
LIFE INSURANCE OF
COMPANY NORTH TEXAS,
INC.
(1) (Texas) (a) (1) (Texas) (a)
</TABLE>
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 THE Supplement #3
STANDARD
FIRE
INSURANCE
COMPANY
(1)(Connecticut)(a)
|
---------------------------------------------------|-------------------------------------------------
<S><C> | |
| |
| |
44% 25%*
| |
AETNA THE
ASIA AETNA
TRUST INTERNATIONAL
UMBRELLA
FUND
(5) (Hong Kong) (b) (1) (Luxembourg) (b)
* Percentage controlled by Aetna Life and Casualty Company includes ownership by the following:
Aetna Life and Casualty Company 1%,The Aetna Casualty and Surety Company's Global Account
6%, Aetna Investment Management (B.V.I.) Nominees Ltd. 7%, Aetna Life Insurance Company of Percentages are rounded to the
Canada 1%, Aetna Re-Insurance Company (U.K.) Ltd 2%, Aetna Fund Managers (F.E.) Limited nearest whole percent and are based
1% and ALICA Taiwan 1%. on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
As of April 10, 1996 Supplement #4
AETNA
RETIREMENT
SERVICES, INC.
(1) (Connecticut) (a)
<S><C> |
|
|
|
AETNA
RETIREMENT
HOLDINGS, INC.
(1) (Connecticut) (a)
|
|
----------------------------------------------------------------------------------------------------------
| | | |
100% 100% 100% 100%
| | | |
SYSTEMATIZED AETNA LIFE AETNA AETNA
BENEFITS INSURANCE INVESTMENT FINANCIAL
ADMINISTRATORS, AND ANNUITY SERVICES, SERVICES,
INC. COMPANY INC. INC.
(1) (Connecticut) (a) (1) (Connecticut) (a) (1) (Connecticut) (a) (1) (Connecticut) (a)
|
|
See Supplement #4a
</TABLE>
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 Supplement #4a
AETNA LIFE
INSURANCE
AND ANNUITY
COMPANY
(1)(Connecticut)(a)
<S><C> |
-----------------------------------------------------------------------------------------
| | | | |
100% 100% | 99% 100%
| | | | |
AETNA AETNA | AETNA AETNA
INSURANCE PRIVATE | INCOME VARIABLE
COMPANY CAPITAL | SHARES ENCORE
OF AMERICA INC. | FUND
|
(1)(Connecticut)(a) (1)(Connecticut)(a) | (5)(Massachusetts)(b) (5)(Massachusetts)(b)
|
--------------------------------------------------------------------------------------------
| | | | |
100% 97%* 100% 100% 6%**
| | | | |
AETNA AETNA AETNA AETNA AETNA
GET FUND VARIABLE GENERATION INVESTMENT SERIES
SERIES B FUND PORTFOLIOS, ADVISERS FUND,
INC. FUND, INC. INC.
(5)(Massachusetts)(b) (5)(Massachusetts)(b) (1)(Maryland)(b) (1)(Maryland)(b) (1)(Maryland)(b)
* Aetna Life Insurance Company owns 3% of the total
outstanding stock of Aetna Variable Fund.
** Aetna Life Insurance Company owns 1%. Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 Supplement #5
AETNA
CANADA
HOLDINGS
LIMITED
<S><C> (1) (Canada) (a)
|
----------------------------------------|------------------------------------------------------------
| | | | | |
100% 100% 92%* 70%** 100% 100%
| | | | | |
AETNA AETNA LIFE EQUINOX 2733854 AETNA AETNA
TRUST INSURANCE FINANCIAL CANADA CAPITAL ACCEPTANCE
COMPANY COMPANY --8%-- GROUP --30%-- LTD. MANAGEMENT CORPORATION
OF CANADA INC. LIMITED LIMITED
(1) (B.C.) (a) (1) (Canada) (a) (1) (Canada) (a) (1) (Canada) (a) (1) (Ontario) (a) (1) (Ontario) (a)
|
--------------------|----------------------------------------
| | | |
25% 100% 100% 100%
| | | |
ECLIPSE AETNA LANDEX MOUNT-BATTEN
CLAIMS BENEFITS PROPERTIES PROPERTIES
SERVICES, MANAGEMENT LTD. LIMITED
INC. INC.
(1) (Ontario) (b) (1) (Canada(a) (1) (B.C.) (a) (1) (Ontario) (a)
| |
| |
| |
20% 45%
| |
PVS CHURCHILL
PREFERRED OFFICE
VISION PARK
SERVICES LIMITED
INC.
(1) (Canada) (b) (1) (Canada) (b)
* Aetna Life Insurance Company of Canada owns 8% of this corporation.
** Equinox Financial Group, Inc. owns 30% of this corporation. Percentages are rounded to the nearest whole percent and
are based on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 AETNA Supplement #6
INTERNATIONAL,
INC.
|
(1)(Connecticut)(a)
|
<S><C> ------------------------------------------------------------------------
| | | | |
100% 100% 50% 100% |
| | | | |
AETNA AETNA EAST ASIA AE |
INTERNATIONAL INTERNATIONAL AETNA INSURANCE |
HOLDINGS FUND INSURANCE (CAYMAN) |
(HONG KONG) I MANAGEMENT COMPANY LTD. |
LIMITED INC. (BERMUDA) LTD. |
(1)(Hong Kong)(a) (1)(Connecticut) (a)(1)(Bermuda) (b)(1)(Cayman)(a) |
| | |
| | -------------------
| | | |
35% ** 100% 100% |
| | | |
BLUE CROSS EAST ASIA AETNA See
(ASIA PACIFIC) AETNA INTERNACIONAL Supplement
INSURANCE SERVICES DE MEXICO #6a
LTD. COMPANY S.A. DE C.V.
LIMITED
(1)(Hong Kong)(b) (1)(Hong Kong)(b) (1)(Mexico)(a)
| |
| |
See See
Supplement Supplement
#6b #6c
</TABLE>
<TABLE>
<CAPTION>
AETNA
INTERNATIONAL,
INC.
|
(1)(Connecticut)(A)
<S><C>|
- -------------------------------------------------------------
| | |
80% 100% 100%
| | |
ALICA AETNA AETNA
HOLDINGS LIFE INTERNATIONAL
INC. INSURANCE HOLDINGS
COMPANY OF (HONG KONG) II
AMERICA LIMITED
(1)(Connecticut)(a) (1)(Connecticut)(a) (1)(Hong Kong)(a)
| | |
| | |
| | |
75% * 50% 82%
| | |
AETNA PT DANAMON- DAYA
S.A. AETNA LIFE AETNA
INSURANCE (MALAYSIA)
COMPANY SDN. BHD.
(1)(Chile)(a) (1)(Indonesia)(a) (1)(Malaysia)(a)
| |
| |
See 100%
Supplement
#6d AETNA
UNIVERSAL
INSURANCE
SDN. BHD.
(1)(Malaysia)(a)
* Aetna Life and Casualty Company owns 25% of this corporation. Percentages are rounded to the nearest whole percent
** East Asia Aetna Insurance Company (Bermuda) Ltd. owns 30% of and are based on ownership of voting rights.
Blue Cross (Asia Pacific) Insurance Ltd.
</TABLE>
<PAGE>
<TABLE>
As of April 10, 1996 Supplement #6a
AETNA
INTERNATIONAL,
INC.
|
|
<S><C> (1)(Connecticut)(a)
---------------------------------------------------------------------------------------------------------------
| | | | | |
100% 100% 100% 100% 97%* 100%
| | | | | |
AETNA AETNA AETNA AE FIVE AETNA AETNA
INVESTMENT INVESTMENT CAPITAL INCORPORATED SECURITIES CAPITAL
MANAGEMENT MANAGEMENT HOLDINGS, INVESTMENT MANAGEMENT
(TAIWAN) (AUSTRALIA) INC. MANAGEMENT INTERNATIONAL
LIMITED LIMITED (TAIWAN) LTD. LTD.
(1) (Taiwan) (a) (1) (Australia) (a) (1) (Connecticut) (a) (1) (Connecticut) (b) (1) (Taiwan) (a) (1) (United Kingdom (a)
3% owned by various wholly-owned Aetna subsidiaries as nominee for Percentages are rounded to the nearest whole percent
Aetna International, Inc. and are based on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
As of April 10, 1996 Supplement #6b
BLUE CROSS
(ASIA PACIFIC)
INSURANCE
LTD.
(1) (Hong Kong) (b)
<S><C> |
---------------------------------------------------
| | |
100% 100% 100%
| | |
TRAVELGUARD TOURSAFE TRAVELSAFE
LIMITED LIMITED LIMITED
(1) (Hong Kong) (b) (1) (Hong Kong) (b) (1) (Hong Kong) (b)
</TABLE>
Percentages are rounded to the nearest whole percent and are based on
ownership of voting rights.
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 Supplement #6c
AETNA
INTERNACIONAL
DE MEXICO
S.A. DE C.V.
(1)(Mexico)(a)
|
15%*
|
VALORES
MONTERREY
AETNA,
S.A.
DE C.V.
(1)(Mexico)(b)
|
<S><C> -------------------------------------------------------------------------------------------------------------------
| | | | |
100% 100% 100% 100% 95%
| | | | |
MEXIMED, FIANZAS SEGUROS GRUPO VAMSA, ASESORES EN
S.A. DE C.V. MONTERREY MONTERREY S.A. DE C.V. PROMOCION
AETNA, AETNA, SEGUNOMINA
S.A. S.A. S.A. DE C.V.
(1)(Mexico)(a) (1)(Mexico)(a) (1)(Mexico)(a) (1)(Mexico)(a) (1)(Mexico)(a)
*Aetna International, Inc. and AE Five, Inc. each own 15% of this corporation.
Percentages are rounded to the nearest whole
percent and are based on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
As of April 10, 1996 Supplement #6d
AETNA
S.A.
(1) (Chile (a)
|
<S><C> |
-------------------------------------------------------------------------------------------------------------
| | | | | | | |
73%**** 75%** 75%** | 75%** 50%* | 75%**
| | | | | | | |
AETNA AETNA AETNA | AETNA AETNA | AETNA
CHILE ADMINISTRADORA CREDITO | PENSIONES PENSIONES | CHILE
SEGUROS DE FONDOS DE HIPOTECARIO | S.A. PERU | SEGUROS
GENERALES INVERSION S.A. | S.A. | DE VIDA
S.A. S.A. | | S.A.
(1) (Chile) (a) (1) (Chile) (a) (1) (Chile) (a) | (1) (Chile) (a) (1) (Peru) (a) | (1) (Chile) (a)
| | | | |
| | | | |
---------------------------------------------------- -----------
| | | | | |
60% 85%***** 68%*** 52% 30% 100%
| | | | | |
AETNA AETNA AETNA ADMINISTRADORA ADMINISTRADORA AETNA
VIDA INTERNATIONAL SALUD DE FONDOS DE FONDOS INVERSIONES
S.A. PERU S.A. DE PENSIONES DE PENSIONES LIMITADA
S.A. SANTA MARIA INTEGRA
S.A. S.A.
(1) (Argentina) (a) (1) (Peru) (a) (1) (Chile) (a) (1) (Chile) (a) (1) (Peru) (a) (1) (Chile) (a)
| |
34% 100%
| |
COMPANIA SANTA MARIA
DE SEGUROS INTERNACIONAL
CONDOR S.A.
S.A.
(1) (Peru) (a) (1) (Chile) (a)
* Santa Maria Internacional S.A owns 50% of this company.
** Aetna Inversions Limitada owns 25% of these companies.
*** Aetna Inversions Limitada owns 23% of this company.
**** Aetna Inversions Limitada owns 24% of this company. Percentages are rounded to the nearest whole percent and
***** Aetna Chile Seguros DeVida S.A. and Aetna Chile are based on ownership of voting rights.
Seguros Generales S.A. have combined ownership of 15%.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of April 10, 1996 Supplement #7
AETNA
INTERNATIONAL
(N.Z.)
LIMITED
(1) (New Zealand) (a)
|
|
50%
|
|
AETNA
HEALTH
(N.Z.)
LIMITED
(1) (New Zealand) (a)
|
<S> <C> ---------------------------------------------------
| | |
| | |
100% 100% 100%
| | |
| | |
AETNA LIFE FIRST MANAGED
INSURANCE MEDICAL CARE NEW
(N.Z.) CORPORATION ZEALAND
LIMITED LIMITED LIMITED
(1) (New Zealand) (a) (1) (New Zealand) (a) (1) (New Zealand) (a)
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
</TABLE>
<PAGE>
As of April 10, 1996
<TABLE>
AETNA Supplement #2b
LIFE
INSURANCE
COMPANY
|
(1)(Connecticut)(a)
<S> <C> |
---------------------------------------------------------------------------------------------------------------------
| | | | | | | |
99%* 100% 99%* 99%* | 80% 80% 75%
| | | | | | | |
ENSENADA TREVOSE OAKS OAKS | KBC-RED KBC- C.R.I.
DE LAS HOSPITALITY, AT AT | HILL EASTSIDE HOTEL
COLINAS I INC. VALLEY VALLEY | LIMITED LIMITED ASSOCIATES,
ASSOCIATES RANCH I RANCH II | PARTNERSHIP PARTNERSHIP L.P.
|
(2)(Texas)(b) (1)(Connecticut)(b) (2)(Texas)(b) (2)(Texas)(b) | (2)(California)(b) (2)(Arizona)(b) (2)(Iowa)(b)
|
|
|
|
---------------------------------------------------------------------------------------------------------------------
| | | | | | | |
100% 100% 100% 100% | 100% 99%*** 60%
| | | | | | | |
TRUMBULL TRUMBULL TRUMBULL TRUMBULL | SOUTHEAST SOUTHFIELD LINCOLN
ONE, TWO, THREE, FOUR, | SECOND PARTNERS RANCHO
INC. INC. INC. INC. | AVENUE, CUCAMONGA
| INC. ASSOCIATES
|
(1)(Connecticut)(a) (1)(Connecticut)(a) (1)(Connecticut)(a) (1)(Connecticut)(a)|(1)(Delaware)(a) (2)(Maryland)(b) (2)(California)(b)
|
|
|------------------------
| |
| 99%**
| |
See VILLAGE
Supplement GREEN OF
#2c MADISON
HEIGHTS
(2)(Michigan)(b)
* Aetna Life Insurance Company is a 99% general partner and Trumbull One, Inc. is a 1% limited partner.
** Aetna Life Insurance Company is a 99% general partner and Trumbull Three, Inc. is a 1% limited partner.
*** Aetna Life Insurance Company is a 99% general partner and Trumbull Four, Inc. is a 1% limited partner. Percentages are
rounded to the nearest
whole percent and are
based on ownership of
voting rights.
Page 32
</TABLE>
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of February 29,1996, there were 527,607 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account C.
ITEM 28. INDEMNIFICATION
Reference is hereby made to Section 33-320a of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and officers of
Connecticut corporations. The statute provides in general that Connecticut
corporations shall indemnify their officers, directors, employees, agents,
and certain other defined individuals against judgments, fines, penalties,
amounts paid in settlement and reasonable expenses actually incurred in
connection with proceedings against the corporation. The corporation's
obligation to provide such indemnification does not apply unless (1) the
individual is successful on the merits in the defense of any such proceeding;
or (2) a determination is made (by a majority of the board of directors not a
party to the proceeding by written consent; by independent legal counsel
selected by a majority of the directors not involved in the proceeding; or by
a majority of the shareholders not involved in the proceeding) that the
individual acted in good faith and in the best interests of the corporation;
or (3) the court, upon application by the individual, determines in view of
all the circumstances that such person is reasonably entitled to be
indemnified.
C.G.S. Section 33-320a provides an exclusive remedy: a Connecticut
corporation cannot indemnify a director or officer to an extent either
greater or less than that authorized by the statute, e.g., pursuant to its
certificate of incorporation, bylaws, or any separate contractual
arrangement. However, the statute does specifically authorize a corporation
to procure indemnification insurance to provide greater indemnification
rights. The premiums for such insurance may be shared with the insured
individuals on an agreed basis.
Consistent with the statute, Aetna Life and Casualty Company has procured
insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor, which supplements the indemnification
rights provided by C.G.S. Section 33-320a to the extent such coverage does
not violate public policy.
ITEM 29. PRINCIPAL UNDERWRITER
(a) In addition to serving as the principal underwriter for the
Registrant, Aetna Life Insurance and Annuity Company (ALIAC) also
acts as the principal underwriter for Variable Life Account B and
Variable Annuity Accounts B and G (separate accounts of ALIAC
registered as unit investment trusts), and Variable Annuity Account
I (a separate account of Aetna Insurance Company of America
registered as a unit investment trust). Additionally, ALIAC is the
investment adviser for Aetna Variable Fund, Aetna Income Shares,
Aetna Variable Encore Fund, Aetna Investment Advisers Fund, Inc.,
Aetna GET Fund, Aetna Series Fund, Inc. and Aetna Generation
Portfolios, Inc. ALIAC is also the depositor of Variable Life
Account B and Variable Annuity Accounts B and G.
<PAGE>
(b) See Item 25 regarding the Depositor.
(c) Compensation as of December 31, 1995:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ---------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Aetna Life $1,830,629 $74,341,006
Insurance and
Annuity Company
</TABLE>
* Compensation shown in column 5 includes deductions for mortality and expense
risk guarantees and contract charges assessed to cover costs incurred in the
sales and administration of the contracts issued under Account C.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All records concerning contract owners of Variable Annuity Account C are
located at the home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement
on Form N-4 as frequently as is necessary to ensure that the
audited financial statements in the registration statement are
never more than sixteen months old for as long as payments under
the variable annuity contracts may be accepted;
(b) to include as part of any application to purchase a contract
offered by a prospectus which is part of this registration
statement on Form N-4, a space that an applicant can check to
request a Statement of Additional Information; and
<PAGE>
(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this Form
N-4 promptly upon written or oral request.
(d) The Company hereby represents that it is relying upon and complies
with the provisions of Paragraphs (1) through (4) of the SEC
Staff's No-Action Letter dated November 22, 1988 with respect to
language concerning withdrawal restrictions applicable to plans
established pursuant to Section 403(b) of the Internal Revenue
Code. See American Counsel of Life Insurance; SEC No-Action
Letter, [1989 Transfer Binder] Fed. SEC. L. Rep. (CCH) PARA 78,904
at 78,523 (November 22, 1988).
(e) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication
of such issue.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, the Registrant, Variable Annuity Account C of Aetna Life
Insurance and Annuity Company, has duly caused this Post-Effective Amendment No.
5 to its Registration Statement on Form N-4 (File No. 33-75986) to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Hartford, State of Connecticut, on the 12th day of April, 1996.
VARIABLE ANNUITY ACCOUNT C OF AETNA LIFE
INSURANCE AND ANNUITY COMPANY
(REGISTRANT)
By: AETNA LIFE INSURANCE AND ANNUITY
COMPANY
(DEPOSITOR)
By: Daniel P. Kearney*
----------------------------------------
Daniel P. Kearney
President
As required by the Securities Act of 1933, as amended, this Post-Effective
Amendment No. 5 to the Registration Statement on Form N-4 (File No. 33-75986)
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Daniel P. Kearney* Director and President )
- ----------------------- (principal executive officer) )
Daniel P. Kearney )
)
Timothy A. Holt* Director, Senior Vice President and Chief Financial ) April
- ----------------------- Officer ) 12, 1996
Timothy A. Holt )
)
Eugene M. Trovato* Vice President and Treasurer, Corporate Controller )
- ----------------------- )
Eugene M. Trovato )
)
Christopher J. Burns* Director )
- ----------------------- )
Christopher J. Burns )
)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Laura R. Estes* Director )
- ---------------------- )
Laura R. Estes )
)
Gail P. Johnson* Director )
- ---------------------- )
Gail P. Johnson )
)
John Y. Kim* Director )
- ---------------------- )
John Y. Kim )
)
Shaun P. Mathews* Director )
- ---------------------- )
Shaun P. Mathews )
)
Glen Salow* )
- ---------------------- Director )
Glen Salow )
)
Creed R. Terry* Director )
- ---------------------- )
Creed R. Terry )
By: /s/ Julie E. Rockmore
----------------------------------
Julie E. Rockmore
*Attorney-in-Fact
</TABLE>
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- ----
<C> <S> <C>
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance and
Annuity Company establishing Variable Annuity Account C ____
99-B.3.1 Form of Broker-Dealer Agreement ____
99-B.3.2 Alternative Form of Wholesaling Agreement and related Selling
Agreement ____
99-B.4.1 Form of Variable Annuity Contract (G-CDA-IA(RP)) ____
99-B.4.2 Form of Variable Annuity Contract (G-CDA-IA(RPM/XC)) ____
99-B.4.3 Form of Variable Annuity Contract (G-CDA-HF) *
99-B.5 Form of Variable Annuity Contract Application (300-GTD-IA) *
99-B.6 Certification of Incorporation and By-Laws of Depositor *
99-B.8.1 Fund Participation Agreement (Amended and Restated)between
Aetna Life Insurance and Annuity Company, Alger American Fund
and Fred Alger Management, Inc. dated March 31, 1995 ____
99-B.8.2 Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Calvert Asset Management Company
(Calvert Responsibily Invested Balanced Portfolio formerly
Calvert Socially Responsible Series) dated March 13, 1989 and
amended December 27, 1993 ____
99-B.8.3 Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Fidelity Distributors Corporation
(Variable Insurance Products Fund) dated February 1, 1994 and
amended March 1, 1996 ____
99-B.8.4 Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Fidelity Distributors Corporation
(Variable Insurance Products Fund II) dated February 1, 1994
and amended March 1, 1996 ____
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- ----
<C> <S> <C>
99-B.8.5 Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Franklin Advisers, Inc. dated January 31,
1989 ____
99-B.8.6 Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Janus Aspen Series dated April 19, 1994 and
amended March 1, 1996
99-B.8.7 Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Lexington Management Corporation
regarding Natural Resources Trust dated December 1, 1988 and
amended February 11, 1991 ____
99-B.8.8 Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Advisers Management Trust (now Neuberger
& Berman Advisers Management Trust) dated April 14, 1989
and as assigned and modified on May 1, 1995 ____
99-B.8.9 Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Scudder Variable Life Investment Fund dated
April 27, 1992 and amended February 19, 1993 and August 13, 1993 ____
99-B.8.10 Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Investors Research Corporation and TCI
Portfolios, Inc. dated July 29, 1992 and amended December 22, 1992
and June 1, 1994 ____
99-B.9 Opinion of Counsel *
99-B.10.1 Consent of Independent Auditors ____
99-B.10.2 Consent of Counsel ____
</TABLE>
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- ----
<C> <S> <C>
99-B.13 Computation of Performance Data *
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures
27 Financial Data Schedule ____
</TABLE>
*Incorporated by reference
<PAGE>
[AETNA LOGO] [AETNA LETTERHEAD]
AETNA LIFE INSURANCE AND ANNUITY COMPANY
I, Susan E. Schechter, hereby certify that I am the duly elected and acting
Corporate Secretary of Aetna Life Insurance and Annuity Company (the "Company"),
a company organized and existing under the laws of the State of Connecticut, and
that the following Votes were duly adopted by the Board of Directors of the
Corporation on November 15, 1993 and June 17, 1992, respectively, and that such
votes remain in full force and effect:
VOTED: That the Company is hereby authorized to exercise the powers
granted by the terms of Sections 38a-459 and 38a-433a of the
Connecticut General Statutes (or any successor provision to
either of those sections).
and, further
VOTED: That the head of each Strategic Business Unit (SBU) of this
Company, or his or her delegate, is hereby authorized, acting on
this Company's behalf, to cause the establishment of one or more
separate accounts under Connecticut insurance law for the purpose
of funding contracts primarily marketed by that SBU, and to make
any filings under applicable law and to take any other action
which may be deemed necessary or appropriate to the operations of
any such separate account.
Dated at Hartford, Connecticut on March 19, 1996.
/s/ Susan E. Schechter
----------------------------------
Susan E. Schechter
Corporate Secretary
<PAGE>
BROKER-DEALER AGREEMENT
This AGREEMENT is effective as of this __________ day of _______, 19___, by and
between Aetna Life Insurance and Annuity Company ("Company"), Hartford,
Connecticut 06156, incorporated under the laws of the State of Connecticut, and
_________________ ("Broker-Dealer"), incorporated under the laws of the State of
________________.
BACKGROUND
(1) The company, acting through its designated business unit, issues,
markets and services certain individual and group annuity contracts to
fund retirement arrangements that conform to Sections 401 and 408 of
the Internal Revenue Code, as amended ("contracts"); and
(2) The Company is authorized to sell the Contracts in all appropriate
jurisdictions, having received all the necessary state and federal
regulatory approvals; and
(3) The Company wishes to authorize the Broker-Dealer to sell the
Contracts in accordance with the terms and conditions of this
Agreement; and
(4) The Broker-Dealer wishes to sell the Contracts in accordance with the
terms and conditions of this Agreement; and
(5) The Company and Broker-Dealer are registered with the Securities and
Exchange Commission as broker-dealers under the Securities Exchange
Act of 1934, as amended; are members in good standing of the National
Association of Securities Dealers, Inc. ("NASD"), and are in
compliance with appropriate state insurance and securities licensing
requirements.
AGREEMENT
The Company and Broker-Dealer, in consideration of the covenants and mutual
promises contained in this Agreement and other good and valuable consideration,
the receipt and legal sufficiency of which are acknowledged, agree to the
following terms:
<PAGE>
1. APPOINTMENT AND AUTHORIZATION
(a) The Broker-Dealer is an independent contractor and not an employee,
partner, joint venturer, or associate of the Company. No provision I
this Agreement shall be construed to change the Broker-Dealer's
independent contractor status.
(b) The Company authorizes the Broker-Dealer to sell, and the Broker-
Dealer agrees to sell, the Contracts only through persons who are
registered representatives of the Broker-Dealer in accordance with
NASD requirements, licensed under the appropriate state insurance
laws, and appointed by the Company to offer the Contracts
("Representatives").
(c) The Broker-Dealer shall comply with all the rules of the Company and
applicable federal, state, and NASD requirements covering the sales of
the Contracts.
(d) The Broker-Dealer may obligate the Company only to the extent
authorized under this Agreement or as permitted in writing by an
authorized officer of the Company. Specifically, and not by way of
limitation, the Broker-Dealer is not allowed to make, alter, or
discharge Contracts or waive forfeitures, quote extra rates, extend
the time of payment of any deposit, extend credit, guarantee or
estimate any rate of return, except through the use of authorized
projections of the Company.
(e) The Broker-Dealer is not authorized to receive any money on the
Company's behalf with the exception of the initial deposit to a
Contract, which must be delivered immediately to the Company, as
directed.
(f) The Company reserves the right, without notice to the Broker-Dealer,
to suspend, withdraw, modify the offering of any Contract, including
annuity purchase and interest rates, change the conditions of a
Contract's offering, including its underwriting rules, with respect to
anyone, or to introduce new Contracts. The Broker-Dealer is not
authorized to offer a Contract for sale until notified by the Company
that the requirements of the appropriate state and federal authorities
regarding the proposed offer and sale of the Contract have been met.
2
<PAGE>
(g) The Broker-Dealer has no exclusive territory, and has no exclusive
rights with regard to any transaction covered under this Agreement.
The Company reserves the right to appoint other broker-dealers to
distribute its products or distribute them itself.
2. LICENSES
The Broker-Dealer shall sell Contracts only through those Representative who are
approved in writing by an authorized officer of the Company. The Broker-Dealer
is responsible for securing and keeping in effect the appropriate licenses and
registrations required of its Representatives under this Agreement and for not
allowing any person to sell any Contract if that person either is subject to an
NASD or state regulatory bar or suspension order, or has been a defendant in any
litigation related to sales activities that has been adversely decided or
settled against such person.
3. ADMINISTRATIVE PROCEDURES
(a) The Broker-Dealer shall complete its review for suitability of all
Contract applications and related Company forms received from its
Representatives and forward all relevant documents and any initial
Contract deposit to the Company's designated office within twenty-four
(24) hours of receipt. Otherwise, any initial Contract deposit shall
be returned to the prospective customer within twenty-four (24) hours
of receipt.
(b) The Company has the right to accept or refuse to accept any Contract
application or enrollment form obtained by the Broker-Dealer. Upon
the Company's acceptance of a Contract application or enrollment form
submitted by the Broker-Dealer, the Company shall mail the appropriate
Contract or certificate to the Broker-Dealer, which shall make prompt
delivery to the customer. Notwithstanding this obligation of the
Broker-Dealer, the Company reserves the right to transmit such
Contract or certificate directly to the customer.
3
<PAGE>
4. COMPENSATION
(a) The Broker-Dealer shall be compensated solely in accordance with
Schedule of Commission, attached as Exhibit A, for all sales performed
in connection with this Agreement. The Company may amend this
Schedule at any time. An amendment shall be incorporated in Exhibit A
and shall apply to Contracts issued after the amendment's effective
date. Notice of an amendment or a new Schedule shall be give in
accordance with Section 11.
(b) Commissions payable in connection with the following deposit's,
regardless of any other provision of this Agreement, shall be at the
rates allowed under the Company's pertinent Schedule of Commissions
that is current at the time the deposit is made:
(i) Deposits on reinstatement of surrendered Contracts;
(ii) Deposits to Contracts that, in the Company's judgment, are to
take the place of Contracts previously issued by the Company on
the same life or lives, and
(iii) Deposits on special plans or arrangements not shown in the
Company's rate books, or on cases carrying special rate quotes.
(c) The Company shall mail commission checks and related statements to the
designated Company office for distribution to the Broker-Dealer in
accordance with its directions.
5. ADVANCES AND INDEBTEDNESS
The Company reserves the right to deduct any amount it determines is owed by the
Broke-Dealer to the Company, its affiliates, associates, parent, or subsidiaries
from any compensation due the Broker-Dealer from the Company. This right
covers, but is not limited to:
(a) Advances to the Broker-Dealer;
(b) Compensation previously paid to the Broker-Dealer for deposits
received by the Company and later returned or credited to the
appropriate customer for any reason;
(c) Any overpayment of compensation to the Broker-Dealer, and
(d) Any amount due the Company under Section 6(c).
4
<PAGE>
If the offset of compensation due the Broker-Dealer does not eliminate the
amount owed by the Broker-Dealer, the balance due the Company shall be a debt of
the Broker-Dealer, on which interest shall be charge at eight percent (8%) per
annum. The Company shall have all rights of a creditor to collect amounts owed
it by the Broker-Dealer.
6. BROKER-DEALER SUPERVISORY RESPONSIBILITIES
(a) The Broker-Dealer has complete responsibility and liability under this
Agreement for the supervision of its Representatives, agents, and
other employees in all their activities subject to this Agreement.
The Broker-Dealer shall hold the Company harmless against, and shall
indemnify the Company for all claims, expenses, losses, damages,
liabilities, or causes of action resulting from any negligent,
fraudulent, intentional or unintentional acts, omissions, or errors of
the Broker-Dealer in violation of, or refusal or failure to comply
with, the terms, of this Agreement, or any applicable federal, state,
or NASD requirement.
(b) The Company and Broker-Dealer agree to cooperate fully in any
investigation or proceeding, the subject of which is the Broker-
Dealer, to the extent that such investigation or proceeding concerns
any contract offered under this Agreement. Without limiting the
foregoing:
(i) The Company shall promptly notify the Broker-Dealer of receipt
of any customer complaint or notice of any investigation or
proceeding dealing with the Broker-Dealer and any Contract
offered under this Agreement.
(ii) The Broker-Dealer shall promptly notify the Company of receipt
of any customer complaint or notice of any investigation or
proceeding dealing with any Contract offered under this
Agreement. The Broker-Dealer shall also promptly notify the
Company of any NASD, federal, or state investigation or
proceeding , or related litigation that has been initiated
against it.
5
<PAGE>
(c) The Company reserves the right to make a financial settlement with a
particular customer in response to such customer's allegation of an
error, omission, or wrongdoing by the Broker-Dealer. The Broker-
Dealer shall be notified of any financial settlement made by the
Company under this Section 6 (c). Once notified, the Broker-Dealer
shall reimburse the Company for the amount of the settlement. To the
extent that the Broker-Dealer does not so reimburse the Company, the
balance shall be recovered under Section 5 as a debt of the Broker-
Dealer.
7. TRAINING
The Company will conduct training programs to describe the Contracts and
related Company processes to Broker-Dealer personnel at times and places
mutually agreed upon. The Broker-Dealer shall use its best efforts to support
these programs, including arranging the distribution of manuals and training
materials to its personnel, and to require the attendance of the appropriate
Broker-Dealer personnel before they are permitted to sell any Contract. The
Broker-Dealer shall pay all expenses incurred in connection with the attendance
of Broker-Dealer personnel at these programs as well as the cost of any meeting
room and related expenses incurred as a result of the Company's conducting these
programs.
8. ADVERTISING
(a) The Broker-Dealer shall only use advertising materials, prospectuses,
circulars, letters, pamphlets, schedules, stationery, broadcasting, or
any other sales materials describing the Company or the Contracts that
have first been approved in writing by any authorized officer of the
Company and, if required, filed with the NASD. The Broker-Dealer
shall not permit the use of these materials by unauthorized persons.
(b) The Company will supply the Broker-Dealer with reasonable quantities
of pertinent current prospectuses, disclosure booklets, and other
relevant sales materials it prepares for use by the Broker-Dealer.
All Broker-Dealer marketing plans and methods for selling Contracts
are subject to review by the Company on a periodic basis, but not less
frequently than annually.
6
<PAGE>
9. OWNERSHIP OF CONTRACT-RELATED MATERIALS
(a) All records, customer files and related paperwork, any literature,
authorization cards, sales aids, manuals, and supplies of every kind
and nature furnished by the Company or obtained by the Broker-Dealer
and relating to the Contracts are the exclusive property of the
Company. The Broker-Dealer shall safely keep and preserve such
Company property and shall replace, at its expense, any part that is
lost, damaged, destroyed, or defaced while in its possession or
control.
(b) The Broker-Dealer shall keep confidential any information that is
covered by this Agreement, and shall only disclose such information as
either allowed in writing by an authorized officer of the Company or
expressly mandated by any applicable federal or state requirement, or
court order.
(c) The Broker-Dealer shall return the property described in this
Agreement to the Company free from Broker-Dealer claims or asserted
retention rights upon the termination of this Agreement. The Company
reserves the right to withhold any compensation under this Agreement
due the Broker-Dealer until such property is returned.
10. REVOCATION OF PRIOR AGREEMENTS
(a) This Agreement and any subsequent written amendments constitute the
entire agreement between the Company and Broker-Dealer in connection
with the sale of the contracts described in this Agreement. This
Agreement terminates and supersedes all previous contracts,
agreements, or arrangements made between the parties in connection
with the sale of such Contracts.
(b) This Agreement does not, however, revoke any contracts, agreements, or
arrangements under which commissions and service fees are due or will
become due or will become due the Broker-Dealer on insurance or
annuity contracts issued by the Company prior to this Agreement's
effective date. Notwithstanding this exception to Section 10 (a), no
Company claim of any kind, whether for money or otherwise, against the
Broker-Dealer, or any obligation or vested right of the Broker-Dealer
under any prior contract, agreement, or arrangement with the Company
is waived.
7
<PAGE>
11. NOTICE
All notices, requests, demands, and other communication that must be provided
under this Agreement shall be in writing, and shall be deemed to have been given
on the date of mailing if sent by first class mail, postage prepaid.
All notices to the Company shall be sent to:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Attn.:
----------------------------------
All notices to the Broker-Dealer shall be sent to:
Name:
---------------------------
Address:
---------------------------
---------------------------
Attn.:
---------------------------
12. SEVERABILITY AND MODIFICATIONS
(a) The provisions of this Agreement are severable, and if any provision
of this Agreement or any modification, addendum, or supplement to it
is found to be invalid, such provision shall not affect any other
provision of the Agreement that can be given effect without the
invalid provision.
(b) The Company reserves the right to amend this Agreement at any time.
An amendment shall be effective thirty (30) days from the date notice
is given the Broker-Dealer in accordance with Section 11.
(c) No amendment made by the Broker-Dealer shall be effective unless it is
in writing, assented to, and signed by an authorized officer of the
Company.
8
<PAGE>
13. WAIVER
Failure of either party to require performance of any provision of this
Agreement shall not constitute a waiver of that party's right to enforce such
provision at a later time. Waiver of any breach of any provision shall not
constitute a waiver of any succeeding breach.
14. ASSIGNABILITY
This Agreement may not be assigned unless an authorized officer of the
nonassigning party agrees to the proposed assignment in writing prior to its
effective date.
15. TERMINATION
(a) This Agreement shall terminate immediately if:
(i) The Broker-Dealer is dissolved, liquidated, or otherwise ceases
business operations,
(ii) The Broker-Dealer fails to comply with any of its obligations
under this Agreement in the Company's sole judgment,
(iii) The Broker-Dealer's license or appointment to represent the
Company is terminated,
(iv) The Broker-Dealer's NASD registration or its NASD membership is
terminated,
(v) The Broker-Dealer refuses to accept an amendment made in
accordance with Section 12 (b), or
(iv) At the end of any calendar year, beginning with _____________,
19__, the Broker-Dealer fails to maintain a minimum production
level of $__________ of annualized paid deposits through the
sale of Contracts under this Agreement during such year.
(b) The Company and Broker-Dealer shall have the right, upon thirty (30)
days' written notice delivered pursuant to Section 11, to terminate
this Agreement for any reason.
(c) Notwithstanding the termination of this Agreement, the Company and
Broker-Dealer acknowledge that each of them shall be liable for their
respective obligations undertaken prior to the this Agreement's
termination date.
9
<PAGE>
16. CONSTRUCTION OF AGREEMENT
This Agreement will be construed in accordance with the laws of the State of
Connecticut. any action or suit arising out of this Agreement shall be
instituted in the courts of the State of Connecticut, and the parties consent to
service, jurisdiction, and venue of such courts for all purposes.
17. HEADINGS
The headings in this Agreement are for reference purposes only, and shall not be
deemed part of this Agreement or affect its meaning or interpretation.
18. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Broker-Dealer, by their duly authorized
officers, have caused this Agreement to be executed.
Signed at Hartford, Connecticut this _____ day of ________,19__________
Aetna Life Insurance and Annuity Company
By:
---------------------------------
Title:
---------------------------------
Signed at _____________________ this _________ day of _________,19
----------------------------------------
Broker-Dealer
By:
---------------------------------
Title:
---------------------------------
10
<PAGE>
WHOLESALING AGREEMENT
BETWEEN
AETNA LIFE INSURANCE AND ANNUITY COMPANY
and
---------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 BROKER-DEALER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 SELLING AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 SELLING BROKER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. DUTIES OF THE PARTIES. . . . . . . . . . . . . . . . . . . . . . 2
2.1 APPOINTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 GENERAL DESCRIPTION OF DUTIES. . . . . . . . . . . . . . . . . . . . . 2
2.3 DUTIES OF ALIAC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. SELLING BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 DUE DILIGENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 SELLING AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 RELATIONS WITH SELLING BROKERS . . . . . . . . . . . . . . . . . . . . 4
3.4 ADVERTISING MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4. COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5. LIMITATION OF WHOLESALER'S AUTHORITY . . . . . . . . . . . . . . 5
5.1 SALE OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2 LIMITS ON AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 5
6.1 REPRESENTATION AND WARRANTIES OF ALIAC . . . . . . . . . . . . . . . . 5
6.2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 6
SECTION 7. CUSTOMER CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . 7
7.1 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 8. EFFECTIVE DATE AND TERMINATION . . . . . . . . . . . . . . . . . 7
8.1 EFFECTIVE DATE AND TERMINATION . . . . . . . . . . . . . . . . . . . . 7
8.2 TERMINATION FOR CAUSE BY ALIAC . . . . . . . . . . . . . . . . . . . . 7
8.3 TERMINATION WITHOUT CAUSE. . . . . . . . . . . . . . . . . . . . . . . 9
8.4 CONSEQUENCES OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . 9
8.5 RETURN OF MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 9. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
9.3 NOTICE OF ACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 10. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.1 ADMINISTRATIVE INQUIRIES/CUSTOMER COMPLAINTS . . . . . . . . . . . . . 11
10.2 INDEPENDENT CONTRACTOR STATUS. . . . . . . . . . . . . . . . . . . . . 11
10.3 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.4 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.5 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.6 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.7 CONTROLLING LAW AND VENUE. . . . . . . . . . . . . . . . . . . . . . . 13
10.8 DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.9 SERVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.10 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.11 FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.12 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.13 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
WHOLESALING AGREEMENT
This Agreement ("Agreement") is made and entered into, by and between AETNA LIFE
INSURANCE AND ANNUITY COMPANY ("ALIAC"), a corporation organized and existing
under the laws of the State of Connecticut, with its principal place of business
at 151 Farmington Avenue, Hartford, Connecticut 06156, and ____________________
("__________"), a broker-dealer organized and existing under the laws of
____________, with its principal place of business at
_____________________________________.
WHEREAS, ALIAC is the issuer and underwriter of securities ("Securities") which
are group and individual variable annuity contracts ("ALIAC Contracts") as more
fully described on Schedule A, attached hereto; and
WHEREAS, ALIAC desires to offer and sell the Securities to the public through
broker-dealers registered with the Securities and Exchange Commission ("SEC")
and any applicable states (including the District of Columbia, Puerto Rico and
Guam), and who are members of good standing of the National Association of
Securities Dealers, Inc. ("NASD"); and
WHEREAS, ____________ wishes to assemble a group of selling brokers to offer and
sell the Securities for ALIAC;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, the parties do hereby agree as follows:
SECTION 1. DEFINITIONS
When used in this Agreement, unless the context requires otherwise, the
following terms shall have the meanings indicated:
<PAGE>
1.1 BROKER-DEALER:
"Broker-Dealer" shall mean an entity registered as a broker-dealer with
the Securities and Exchange Commission, applicable states and is a member firm
of the National Association of Securities Dealers, Inc.
1.2 SELLING AGREEMENT:
"Selling Agreement" shall mean the agreement between ALIAC and a Selling
Broker with respect to the offer and sale of the Securities listed on Schedule
A.
1.3 SELLING BROKER:
"Selling Broker" shall mean a Broker-Dealer who enters into a Selling
Agreement with ALIAC.
SECTION 2. DUTIES OF THE PARTIES
2.1 APPOINTMENT: ALIAC hereby designates and ___________ hereby agrees, to
serve as a non-exclusive wholesaler for ALIAC for the purpose of soliciting
Broker-Dealers to become Selling Brokers of the Securities. Such designation
by ALIAC and agreement by _________________ shall not operate as any
limitation or restriction on ALIAC from entering agreements with other
wholesalers with respect to the Securities.
2.2 GENERAL DESCRIPTION OF DUTIES: _____________ shall review the
qualifications of, and shall then propose to ALIAC, the Broker-Dealers to be
used for sale of the Securities. ____________ shall use only the most recent
effective prospectus, as amended, concerning the Securities when soliciting
interest from prospective Selling Brokers. ____________ shall perform the due
diligence on the Broker-Dealer as required in Section 3. Upon determining
that the Broker-Dealer meets ALIAC's standards, as ALIAC may determine from
time to time, ____________ shall provide the Selling Agreement executed by
the Broker-Dealer and its due diligence report to ALIAC.
2
<PAGE>
2.3 DUTIES OF ALIAC: ALIAC shall review the due diligence report on a Broker-
Dealer submitted by ___________. Upon completion of its review, ALIAC shall
either accept the Broker-Dealer as a Selling Broker by executing the Selling
Agreement, or notify ____________ in writing of its reason for rejecting the
Broker-Dealer. ALIAC shall have no obligation to ____________, or any Broker-
Dealer proposed by ____________, to enter a selling Agreement.
SECTION 3. SELLING BROKERS
3.1 DUE DILIGENCE: ____________ shall provide ALIAC with a due diligence
report on each proposed Selling Broker which shall include, but is not
limited to:
a. a current FOCUS report as filed with the NASD;
b. a current copy of Form BD, as amended and filed with the NASD;
c. a current Central Registration Depository ("CRD") report, indicating
all jurisdictions in which the Broker-Dealer is registered and all
reported disciplinary actions;
d. a current CRD report for those registered representatives of the
Broker-Dealer who have "yes" answers to item 22 of Form U-4;
e. a description of the Broker-Dealer's supervisory and compliance
system, including the name of its personnel responsible for
compliance, and copies of compliance and procedures manuals;
f. such other information as ALIAC may request as to a specific Broker-
Dealer or otherwise generally require from time to time; and
g. corporate authorization of the Broker-Dealer to enter the Selling
Agreement.
3.2 SELLING AGREEMENT: Upon acceptance of the Broker-Dealer, ALIAC shall
enter into a Selling Agreement. ALIAC, in its sole discretion, may decline to
enter into a Selling Agreement with any Broker-Dealer proposed by ____________.
ALIAC shall be
3
<PAGE>
free to terminate any Selling Agreement in accordance with the terms of such
Selling Agreement without recourse by, or liability to, ____________.
3.3 RELATIONS WITH SELLING BROKERS: ____________ shall provide reasonable
assistance to ALIAC in resolving any problems, differences and disputes arising
from the relationship among ALIAC, ____________, and a Selling Broker.
____________ shall not establish any procedures or settle any disputes on behalf
of ALIAC without first obtaining ALIAC's written approval. In the event of any
actual or perceived conflict between the interests of ALIAC and ____________,
____________ shall notify ALIAC immediately and either (a) obtain ALIAC's
written consent to continue to resolve the dispute irrespective of the conflict
or (b) employ, at ____________'s expense, a third party with no affiliation with
____________ to resolve the dispute. ALIAC shall first be notified of and have
the right to reject the third party selected by ____________.
3.4 ADVERTISING MATERIALS: ____________________shall use only those
advertising materials and sales litereature, including prospectuses, which have
been first approved by ALIAC and, if required, filed with and approved by the
NASD and any state.
3.5 LICENSES: ____________ agrees that its agents, employees, or
representatives who will be contacting Broker-Dealers for the purpose of
soliciting the execution of Selling Agreements will be licensed, registered and
appointed as required under all applicable federal and state laws and
regulations and the rules of the NASD.
SECTION 4. COMPENSATION
4.1 COMPENSATION: Subject to all terms and conditions of this Agreement,
ALIAC shall pay to ____________ commissions and other compensation, as provided
for in Schedule B, which is attached hereto and made a part of this Agreement.
4
<PAGE>
4.2 EXPENSES: ____________ shall be responsible for any and all expenses it
incurs in carrying out the terms of this Agreement.
SECTION 5. LIMITATION OF WHOLESALER'S AUTHORITY
5.1 SALE OF SECURITIES: Nothing contained in this Agreement shall be
construed as granting authority to ____________ or any of its agents,
representatives or employees to solicit, offer or sell the Securities to
prospective customers.
5.2 LIMITS ON AUTHORITY: ____________ shall have not authority on behalf of
ALIAC to directly or indirectly through any person to:
a. alter the Securities or their terms;
b. waive or modify any terms, conditions or limitations of the
Securities, underwriting rules, nor is it authorized to grant
permits, special rates, interest rates or make endorsements;
c. incur any indebtedness or liability on behalf of ALIAC, or expend or
contract for the expenditure of funds of ALIAC;
d. adjust or settle any claim or commit ALIAC with respect thereto, or
bind ALIAC or any of its affiliates in any way; or
e. make any statements concerning the Securities not contained in the
prospectus describing the Securities or as otherwise may be
authorized by ALIAC in writing.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATION AND WARRANTIES OF ALIAC: ALIAC represents and warrants to
____________ as follows:
a. It is licensed as an insurance company in all 50 states of the United
States and the District of Columbia.
5
<PAGE>
b. It is registered as a Broker-Dealer with SEC and is a member in good
standing of the NASD.
c. The ALIAC Contracts have been submitted for approval or have been
approved for sale by the insurance departments of all states.
d. The Securities have been filed and/or registered, or are exempt from
registration, with the SEC and applicable state jurisdictions.
e. It is a corporation organized, existing and in good standing under
the laws of the State of Connecticut.
f. I has full power and authority to enter into this Agreement and to
carry out its duties and obligations hereunder.
6.2 REPRESENTATIONS AND WARRANTIES: ____________ represents and warrants to
ALIAC as follows;
a. It is registered as a Broker-Dealer with the SEC, is a member in good
standing of the NASD, and is registered to sell securities in all
states and in any other jurisdiction where it is required to be
registered in order to carry out its obligations hereunder and will
continue to be so registered and will continue to be a member in good
standing of the NASD during the term of this Agreement.
b. It is a corporation organized, existing and in good standing under
the laws of the State of ____________ and is qualified to do business
as a corporation in those jurisdictions where it is doing business.
c. It has full power and authority to enter into this Agreement and to
carry out its duties and obligations hereunder.
d. All functions, duties, obligations and responsibilities of
_____________ under this Agreement which require NASD or state
securities registration or state insurance licenses shall be
performed by a duly registered and/or licensed person.
6
<PAGE>
SECTION 7. CUSTOMER CONFIDENTIALITY
7.1 CONFIDENTIALITY: ____________ agrees that the names and addresses and all
other information regarding all customers and prospective customers of ALIAC and
all ALIAC proprietary information which may come to the attention of
____________ or any company or person affiliated with ____________ as a result
of this agreement are confidential. Such information shall not be used or
provided to others, without the prior written consent of ALIAC, by
_____________________ or any company or person affiliated with ____________ for
any purpose whatsoever, except if such disclosure is required by federal or
state regulatory authorities or the NASD. This Section 7 shall survive
termination of this Agreement.
SECTION 8. EFFECTIVE DATE AND TERMINATION
8.1 EFFECTIVE DATE AND TERMINATION: This Agreement shall be effective on the
day executed by ALIAC as indicated in the acknowledgment following and signature
hereto. This Agreement shall remain in full force and effect until it is
terminated pursuant to Section 8.2 or 8.3.
8.2 TERMINATION FOR CAUSE BY ALIAC: ALIAC may terminate this Agreement at any
time for cause by giving written notice to ____________. ALIAC's failure to
terminate this Agreement upon the occurrence of any event set forth below shall
not constitute a waiver of its right to terminate this Agreement at a later date
on account of such occurrence. For purposes of this Section , "cause" shall
include, but not be limited to:
a. Revocation, suspension, refusal to renew, or limitation on any
Broker-Dealer registration of ____________;
7
<PAGE>
b. Imposition of any fine, penalty, suspension or other sanction against
____________ or any of its principals by any federal, state or
foreign securities or insurance regulatory authority or the NASD;
c. Failure by ____________ to perform its responsibilities under the
Agreement;
d. Breach of any of the representations and warranties set forth in
Section 6 of this Agreement;
f. Breach by ____________ of any material term of this Agreement and the
failure to cure such breach within 30 days of the earlier of
discovery or notification by ALIAC; however, if such breach
constitutes activity that if made known to regulatory authorities
could result in a regulatory sanction described in 8.2(a) or (b),
ALIAC may terminate this Agreement irrespective of any cure by
____________;
g. Any criminal act by ____________ or any of its principals which, in
ALIAC's opinion, materially affects ____________'s ability to perform
any of its duties under the Agreement;
h. Filing of a petition in bankruptcy by ____________, the
reorganization under bankruptcy or insolvency laws of ____________,
or the execution by ____________ or on its behalf of an agreement
providing for payment of the debts of ____________; the dissolution,
sale, change of ownership, or any substantial reorganization of
____________ which, in ALIAC's opinion, affects ____________'s
ability to perform any of its duties under the Agreement;
i. Failure by ____________ to cooperate or participate in responding to
or defending against any inquiry, action, complaint, charge or other
proceeding instituted against ALIAC or ____________, to the extent
requested by ALIAC;
j. The making by ____________, or any of its principals, officers,
directors, agents, representatives or employees, knowingly or
intentionally, of any false or misleading statements about ALIAC or
the Securities;
8
<PAGE>
k. Fraud by ____________, or any of its principals, officers, directors,
agents, representatives or employees or the creation of liability for
ALIAC due to the negligence, misfeasance or malfeasance by
____________;
l. Any change in any federal or state laws or regulations which
materially affects the Securities; or
m. A change in federal income tax laws which materially affects the
Securities.
8.3 TERMINATION WITHOUT CAUSE: This Agreement may be terminated without cause
by either party by giving 30 days advance written notice to the other party of
such party's intent to terminate this Agreement. The termination shall be
effective upon the expiration of the 30 days notice.
8.4 CONSEQUENCES OF TERMINATION:
a. If this Agreement is terminated for cause under Section 8.2, ALIAC
shall be entitled to recover from ____________ all damages it has sustained as a
result of the termination, and the acts constituting the cause of termination by
____________. In no event shall ALIAC be obligated to pay liquidated damages to
____________ for termination with or without cause.
b._______________________________________________________________________.
________________________________________________________________________________
______________________________________.
c. Termination of the Agreement shall not affect ALIAC's right to
continue to offer and sell the Securities through Selling Brokers recruited by
____________.
8.5 RETURN OF MATERIALS: Upon termination of this Agreement, ________________
shall promptly return all ALIAC records, supplies and materials to ALIAC and
shall cease all activities on behalf of ALIAC. ALIAC shall cease using any
materials which describe ____________ as a wholesaler or marketer of the
Securities.
9
<PAGE>
SECTION 9. INDEMNIFICATION
9.1 ALIAC shall indemnify ____________ against any liability or loss incurred
by ____________ arising out of or in connection with allegations or claims that
any Prospectus or sales material supplied by ALIAC to ____________ was
materially false or misleading under federal or state securities law or common
law standards of fraud or misrepresentation or arising out of intentional
wrongdoing or gross negligence on the part of ALIAC.
9.2 ____________ shall indemnify ALIAC against any liability or loss incurred
by ALIAC arising out of or in connection with: (i) any violation by
____________, its agents or representatives of federal or state securities laws
or regulations, the rules of the NASD or common law standards of fraud or
misrepresentations; (ii) any violation by ____________, its agents or
representatives of any of the terms of this Agreement; (iii) any intentional
wrongdoing or gross negligence on the party of ____________, its agents or
representatives in the course of any activities or conduct performed in relation
to this Agreement; or (iv) any action where ____________, its officers,
directors, agents, representatives or employees improperly, illegally or in
breach of this Agreement held out to the public that it or they were operating
pursuant to this Agreement or the authority of ALIAC. Any finding by a court,
regulatory body or arbitration panel that ____________, its officers, directors,
agents, representatives or employees engaged in any of the conduct described in
this Section 9.2 shall be conclusive evidence that ALIAC is entitled to
indemnification as set forth in this Section 9. Failure of such a court,
regulatory body or panel to make such a finding shall not preclude ALIAC from
alleging and putting forth proof on the issue.
9.3 NOTICE OF ACTION: Promptly after receipt by an indemnified party of
notice of the commencement of any action, such indemnified party shall, if a
claim with respect to it is to be made against the indemnifying party, notify
the indemnifying party in writing of the commencement of such action; but the
failure to notify the indemnifying party shall not
10
<PAGE>
relieve the indemnifying party from any liability which it may otherwise have to
the indemnified party except and to the extent the indemnifying party is
prejudiced thereby. In case any such action shall be brought against any
indemnified party, and it shall notify the indemnifying party of the
commencement of such action, the indemnifying party shall be entitled to
participate in and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense of such action,
with counsel satisfactory to such indemnified party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnified party).
After notice from the indemnifying party to such indemnified party of its
election to assume the defense of such action, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense other than
reasonable costs of investigation.
SECTION 10. GENERAL
10.1 ADMINISTRATIVE INQUIRIES/CUSTOMER COMPLAINTS: Each party will immediately
notify the other of any regulatory or administrative investigation or inquiry,
claim or judicial proceeding which may concern the Securities or the services
rendered by that party under this Agreement. Each party will immediately notify
the other of any written complaint or grievance concerning the marketing or
servicing of the Securities. Within five (5) business days after receipt by
either party of notice of any investigation, proceeding or complaint as
specified above, the party who receives the notice will notify the other party
by forwarding a copy of all documents received in connection with the matter and
will communicate to the other party all additional information necessary to
furnish the other party with a complete understanding of same. ____________
shall cooperate fully and assist ALIAC in the investigation of and response to
all such matters.
10.2 INDEPENDENT CONTRACTOR STATUS: In the performance of all of their
responsibilities under this Agreement, the relationship of the parties is that
of independent contractors and none other. Nothing contained herein shall be
construed as establishing an employment,
11
<PAGE>
joint venture, partnership or agency relationship between ALIAC and ____________
or between ALIAC and the Selling Brokers.
10.3 WAIVER: Failure of either party to require performance of any provision
of this Agreement shall not constitute waiver of that party's right to enforce
such provision at a later time. Waiver of any breach of any provision shall not
constitute a waiver of any succeeding breach.
10.4 ASSIGNMENT: Neither this Agreement nor any benefits to accrue hereunder
shall be assigned or transferred by either party, in whole or in part, without
the prior written consent of the other party.
10.5 AMENDMENT: This Agreement contains the entire agreement of the parties
and may be amended only if agreed to in writing and signed by an authorized
officer of each party.
10.6 NOTICES: Any notice given in connection with this Agreement shall be in
writing. Notice shall be deemed to be provided on the date of service if served
on the party to whom notice is to be given or on the date of mailing if it is
sent registered or certified mail, postage prepaid, to the address set forth
below, or to any other address as such party may designate in writing:
Notice to ____________:
Notice to ALIAC:
Aetna Life Insurance Annuity Company
Annuity Operations, RW1F
151 Farmington Avenue
Hartford, CT 06156
12
<PAGE>
10.7 CONTROLLING LAW AND VENUE: This Agreement and all questions relating to
its validity, interpretation, performance and enforcement shall be governed by
and construed in accordance with the laws of the State of Connecticut.
Performance under this Agreement may be enforced only in the courts located
within the State of Connecticut and the parties agree that such courts shall
have venue and exclusive subject matter and all personal jurisdiction.
10.8 DISPUTE RESOLUTION: If any dispute arises out of this Agreement or its
termination, ALIAC and ____________ will use their best efforts to resolve the
dispute informally, including, if desired by both parties, referring the dispute
to a mutually acceptable mediator. In the event that informal resolution is not
achieved, the dispute will be settled by arbitration in Hartford, Connecticut in
accordance with the Code of Arbitration Procedure of the NASD, or such other
arbitral forum agreed to by the parties.
10.9 SERVERABILITY: If any portion or all of any Section or Sections, or any
application thereof, shall become invalid, illegal or unenforceable for any
reason, the remainder of this Agreement and any other application of such
provision shall not be affected thereby.
10.10 HEADINGS:
The headings and titles of paragraphs contained in this Agreement are for
convenience only and have no effect upon the construction or interpretation of
any part of this Agreement.
10.11 FORCE MAJEURE: No party to this action shall be responsible to the other
for delays or errors in its performance or other breach under this Agreement
occurring solely by reason of circumstances beyond its control, including acts
of civil or military authority, national emergencies, fire, major mechanical
breakdown, labor disputes, flood or catastrophe, acts of God, insurrection, war,
riots, delays of suppliers, or failure of transportation, communication or power
supply.
13
<PAGE>
10.12 COUNTERPARTS: This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of such shall constitute one
and the same instrument.
10.13 ENTIRE AGREEMENT: This Agreement constitutes the entire agreement of the
parties and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and there
are no warranties, representations and/or agreements between the parties in
conjunction with the subject matter hereof except as set forth in this
Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be executed.
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
By:
------------------------
Title:
------------------------
Date:
------------------------
14
<PAGE>
STATE OF CONNECTICUT )
)
) ss. Hartford
)
COUNTY OF HARTFORD )
On this ____________ the ____________ day of ______________ 1994, before me,
____________ ____________, the undersigned officer, personally appeared
____________, who acknowledged himself/herself to be the ____________ of Aetna
Life Insurance and Annuity Company, a corporation, and that he/she, as such
____________, being authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself/herself as ____________.
IN WITNESS WHEREOF, I have hereunto set my hand
-----------------------------------
By: ------------------------
Title:
------------------------
Date:
------------------------
15
<PAGE>
STATE OF )
)
) ss.
)
COUNTY OF )
On this ____________ day of ______________, 1994, before me, __________________,
the undersigned officer, personally appeared ____________________________, who
acknowledged himself/herself to be the _____________________ of _______________
___________________, and that he/she, as such _________________________, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself/herself as
_______________________.
16
<PAGE>
EXHIBIT TO WHOLESALING AGREEMENT
SELECTED BROKER AGREEMENT
<PAGE>
SELECTED BROKER AGREEMENT
TABLE OF CONTENTS
-----------------
1. Definitions....................................................... 1
2. Agreements of The Company......................................... 2
3. Agreements of Broker.............................................. 3
A. Registration and Licenses.................................... 3
B. Sales Practices and Supervision.............................. 3
C. Handling of Customer Payments................................ 4
D. Independent Contractor....................................... 4
E. Training..................................................... 4
F. Use of Sales and Training Materials.......................... 4
G. Compliance with Laws and Regulations......................... 4
H. Maintaining Records.......................................... 6
I. Proprietary Information...................................... 6
J. Marketing Changes............................................ 7
4. Compensation...................................................... 7
A. Payment Schedule............................................. 7
B. No Withholding of Payments................................... 8
C. Deductions by the Company.................................... 8
D. Payment Upon Termination..................................... 8
5. Complaints and Investigations..................................... 8
A. Cooperation.................................................. 8
B. Settlement by the Company.................................... 9
6. Term of Agreement; Entire Agreement............................... 9
7. Indemnification................................................... 10
A. By the Company............................................... 10
B. By the Broker................................................ 10
C. Notice of Action............................................. 11
8. Assignability..................................................... 11
9. Governing Law..................................................... 11
<PAGE>
- 2 -
10. Revocation of Prior Agreements................................... 12
11. Severability..................................................... 12
12. Amendments....................................................... 12
13 Waiver........................................................... 13
14. Termination...................................................... 13
15. Notice........................................................... 14
16. Headings ........................................................ 14
17. Counterparts..................................................... 14
<PAGE>
- 3 -
SELECTED BROKER AGREEMENT
-------------------------
This AGREEMENT ("Agreement") is effective as of this ______ day of
___________________, 1994, by and between Aetna Life Insurance and Annuity
Company ("Company"), Hartford, Connecticut 06156, incorporated under the laws of
the State of Connecticut, and ___________________________________
("Broker"), incorporated under the laws of the State of _____________________.
WITNESSETH:
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
1. DEFINITIONS
A. PRODUCTS -- Variable life insurance contracts and/or variable
annuity contracts and/or investment company shares described in
Schedule A attached hereto and issued and distributed by the Company.
From time to time Schedule A may be updated or amended by the Company
and without approval by the Broker. Such updates or amendments will
be effective upon written notification to the Broker that a new or
amended Schedule A has been issued.
B. ACCOUNTS -- Separate accounts established and maintained by the
Company pursuant to applicable laws to fund the benefits under the
Products.
C. REGISTRATION STATEMENT -- The registration statements and amendments
thereto relating to the Products and the Accounts, including financial
statements and all exhibits as filed with the SEC.
D. PROSPECTUS -- The prospectuses included within the Registration
Statements referred to herein and used with respect to the
solicitation, offer and sale of the Products.
<PAGE>
- 4 -
E. 1993 ACT -- The Securities Act of 1933, as amended.
F. 1934 ACT -- The Securities Exchange Act of 1934, as amended.
G. 1940 ACT -- The Investment Company Act of 1940, as amended.
H. SEC -- The United States Securities and Exchange Commission.
2. AGREEMENTS OF THE COMPANY
A. The Company, hereby authorizes Broker during the term of this
Agreement to solicit, offer and sell Products to suitable customers,
provided that there is an effective Registration Statement relating to
such Products and provided further that Broker has been notified by
the Company that the Products are qualified for sale under all
applicable securities and insurance laws of the state or jurisdiction
in which the solicitations, offers or sales will be made.
B. The Company, during the term of this Agreement, will notify Broker of
the issuance by the SEC or any state or jurisdiction of any stop order
with respect to the Registration Statement or any amendments thereto
or the initiation of any proceedings for that purpose or for any other
purpose relating to the registration and/or offering of the Products
and of any other action or circumstance that may prevent the lawful
sale of any Product in any state or jurisdiction.
C. During the term of this Agreement, the Company shall advise Broker of
any amendment to any Registration Statement and/or any amendment,
sticker or supplement to any Prospectus.
3. AGREEMENTS OF BROKER
A. REGISTRATION AND LICENSES
<PAGE>
- 5 -
Broker represents that it is a registered broker-dealer under the 1934
Act and a member in good standing of the National Association of
Securities Dealers, Inc. ("NASD"). Broker represents that it is or
will become registered, as required, in those states and jurisdictions
where its agents or representatives will solicit, offer and sell the
Products. Broker represents that each agent or representative who
solicits, offers and sells the Products will be a duly registered
representative of Broker. Broker represents that each registered
representative will hold all registrations and licenses required by
the NASD and any state or jurisdiction.
B. SALES PRACTICES AND SUPERVISION
Broker agrees to use its best efforts to lawfully solicit, offer and
sell the Products and further agrees to the following:
(1) The Broker shall only use advertising material and sales
literature, including prospectuses, which have been first
approved by the Company and, if required, filed with the NASD
and any state or jurisdiction. The Broker agrees to discard
immediately any out dated sales and advertising material and
prospectuses.
(2) The Broker shall establish and implement compliance and
supervisory procedures for the supervision of the sales
practices and conduct of its agents and representatives. The
Broker shall submit to the Company, as reasonably requested,
periodic reports concerning the compliance by the Broker and
its agents and representatives with its procedures and
applicable laws and regulations.
(3) The Broker agrees that its registered representatives and
agents will not make recommendations to a customer to purchase
a Product in the absence of reasonable grounds to believe that
the Product is suitable for the customer. While not limited to
the following, a determination of suitability shall be based on
information obtained from the customer by the registered
representative after reasonable inquiry concerning the customer's
<PAGE>
- 6 -
investment objectives, other investment holdings, financial and
tax status and needs.
C. HANDLING OF CUSTOMER PAYMENTS
All payments for Products collected by registered representatives or
agents of Broker shall be held at all times in a fiduciary capacity
and shall be remitted promptly in full together with such
applications, forms and other required documentation to the Company.
Payments from customers shall only be in the form of checks, money
orders or other instruments and shall be drawn to the order of the
Company. Broker acknowledges that the Company retains the ultimate
right to control the sale of the Products and that the Company shall
have the unconditional right to reject, in whole or part, any
application or subscription for a Product. In the event the Company
rejects an application or subscription, the Company will return
immediately all payments directly to the purchaser and Broker will be
notified of such action. Upon the Company's acceptance of a Product
application or subscription submitted by the Broker, the Company shall
mail the appropriate annuity or life insurance contract or shareholder
certificate (if requested by the customer) to the Broker, which shall
make prompt delivery to the customer. Notwithstanding this obligation
of the Broker, the Company reserves the right to transmit such
contract or certificate directly to the purchaser. The Company shall
mail any confirmation of the sale of investment company shares to the
purchaser in accordance with applicable requirements. In the event
that any purchaser of a Product elects to return such Product pursuant
to either Rule 6e-2(b)(13)(viii) or Rule 6e-3(T)(b)(13)(viii) of the
1940 Act, the purchaser will receive a refund in accordance with the
provisions of the applicable Rule.
D. INDEPENDENT CONTRACTOR
The Broker agrees it is and shall act as an independent contractor.
Nothing in this Agreement shall make Broker, or any one of its
employees, agents or representatives, an employee of the Company.
Neither the Broker, nor its agents, representatives and employees
shall hold themselves out to be employees, agents or representatives
of the Company in any dealings with the public.
<PAGE>
- 7 -
E. TRAINING
The Company will conduct training programs to describe the Products
and Company procedures to Broker personnel at times and places
mutually agreed upon. The Broker shall use its best efforts to
participate in these programs and to require the attendance of its
agents and representatives before they are permitted to sell any
Product. The Broker shall pay all expenses incurred in connection
with the attendance of Broker personnel at these programs as well as
the cost of any meeting room and related expenses.
F. USE OF SALES AND TRAINING MATERIALS
Broker agrees that any material it develops, approves or uses for
sales, training, explanatory or other purposes in connection with the
Products, including generic advertising and/or training materials,
will not be used without the prior written consent of the Company.
G. COMPLIANCE WITH LAWS AND REGULATIONS
The solicitation, offer and sale of the Products by Broker and its
agents and representatives shall be undertaken only in accordance with
applicable laws and regulations. No agent or representative of Broker
shall solicit, offer or sell the Products until duly licensed and
appointed by the Company as a life insurance and variable contract
agent of the Company in the appropriate state or jurisdiction. Broker
shall ensure that such agents or representatives fulfill any training
requirements necessary to be licensed. Broker understands and
acknowledges that neither Broker nor its agents or representatives is
authorized by the Company to give any information or make any
representation in connection with the solicitation, offer or sale of
the Products other than those contained in the Prospectus or sales or
advertising material authorized in writing by the Company.
H. MAINTAINING RECORDS
Broker shall have the responsibility for maintaining the records of
its agents and representatives licensed, registered and otherwise
qualified to sell the Products. Broker shall maintain such records as
required by applicable laws and regulations. The books, accounts and
records
<PAGE>
- 8 -
maintained by Broker under the terms of this Agreement that relate to
the sale of the Products, the Company, the Accounts, and/or Broker
shall be maintained so as to clearly and accurately disclose the
nature and details of the transactions.
I. PROPRIETARY INFORMATION
All records, customer files, customer names, addresses, telephone
numbers and related paperwork, literature, authorization cards, sales
aids, manuals and supplies of every kind and nature furnished by the
Company or obtained by the Broker and relating to the Products are the
exclusive property of the Company. The Broker shall safely keep and
preserve such Company property and shall replace, at its expense, any
such property that is lost, damaged, destroyed, or defaced while in
its possession or control. The Broker shall keep confidential any
information that is covered by this Agreement, and shall only disclose
such information if authorized in writing by the Company or expressly
required by the laws or regulations of any jurisdiction or the NASD or
court order. The Broker shall return any property described in this
Agreement to the Company free from the Broker's claims or asserted
retention rights upon the termination of this Agreement. The Company
reserves the right to withhold any compensation due the Broker under
this Agreement until such property is returned.
J. MARKETING CHANGES
With respect to the Products covered by this Agreement, as amended
from time to time, Broker shall notify the Company of any material
change or intention to materially change its marketing operations.
Such notice shall be given in the manner specified in Section 10 of
this Agreement. All Broker marketing plans and methods for offering
Products are subject to periodic review by the Company, but not less
frequently than annually.
4. COMPENSATION
A. PAYMENT SCHEDULE
The Company agrees to pay commissions to Broker as compensation for the
sale of each Product lawfully sold by an agent or representative of
<PAGE>
- 9 -
Broker. The amount of commission shall be in accordance with the
Compensation Schedule attached hereto as Schedule B. The Compensation
Schedule may be amended by the Company at any time without approval of
the Broker. No compensation is payable unless the Broker and the
representative and agent are in compliance with all applicable
insurance and securities laws, rules and regulations at the time of
the solicitation, offer and sale of a Product and thereafter.
Notwithstanding any provision in the Compensation Schedule
concerning charge backs, if any variable contract is tendered for
redemption within seven business days after acceptance of the
contract application, no compensation shall be paid.
B. NO WITHHOLDING OF PAYMENTS
Neither Broker nor any of its agents or representatives shall have any
right to withhold or deduct any part of any payment received from a
customer.
C. DEDUCTIONS BY THE COMPANY
The Company reserves the right to deduct any amount it determines is
owed by the Broker to the Company or its affiliates, from any
compensation due the Broker from the Company. This right shall apply
but is not limited to the following: (i) advances to the Broker;
(ii) compensation paid to the Broker for payments by a customer
received by the Company and later returned or credited to such
customer for any reason; and (iii) any overpayment of compensation to
the Broker. Any balance due the Company after such deduction shall be
a debt of the Broker and will accrue interest at eight percent (8%)
per annum. The Company shall have all rights of a creditor to collect
amounts owed it by the Broker.
D. PAYMENT UPON TERMINATION
Upon the termination of this Agreement, the Company will pay
commissions to the Broker on: (i) payments for Products which the
Company receives within sixty (60) days of the termination date on
Products sold by the Broker on or before the termination date; and
(ii) any
<PAGE>
- 10 -
renewal commissions which would otherwise be due on business placed
with the Company prior to the termination date of this Agreement
unless payment or receipt of renewal commissions would violate any
laws, rules or regulations of any jurisdiction or the NASD.
5. COMPLAINTS AND INVESTIGATIONS
A. COOPERATION
The Company and Broker agree to cooperate fully in any investigation
or proceeding, the subject of which is the Broker, to the extent that
such investigation or proceeding concerns any matters related to this
Agreement. Without limiting the foregoing:
(1) The Company shall promptly notify the Broker of receipt of any
customer complaint or notice of any inquiry, investigation or
proceeding concerning any matter related to this Agreement.
(2) The Broker shall promptly notify the Company of receipt of any
customer complaint or notice of any inquiry, investigation or
proceeding concerning any matter related to this Agreement. The
Broker shall promptly notify the Company of any NASD, federal or
state inquiry, investigation or proceeding, or related litigation
that has been initiated against the Broker.
B. SETTLEMENT BY THE COMPANY
The Company reserves the right to settle any claim or complaint made
by a customer concerning any conduct, act or omission by the Broker or
its agents or representatives. The Broker shall reimburse the Company
for the amount of any such settlement. Any settlement payments made
by the Company shall be reimbursed by the Broker and will be a debt of
the Broker as described in Section 4.C.
6. TERM OF AGREEMENT; ENTIRE AGREEMENT
A. This Agreement shall continue in force for one year from its effective
date and thereafter shall automatically be renewed every year for a
further one
<PAGE>
- 11 -
year period, except that either party may unilaterally terminate this
Agreement upon thirty (30) days written notice to the other party of
its intention to do so.
B. Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except: (i) the provisions set forth in
Section 5; (ii) the provisions set forth in Section 7; and (iii) the
provisions set forth in Section 4.C. and 4.D.
7. INDEMNIFICATION
A. BY THE COMPANY. The Company shall indemnify the Broker against any
liability or loss incurred by the Broker arising out of or in
connection with allegations or claims that any Prospectus or sales
material supplied by the Company to the Broker was materially false or
misleading under federal or state securities law or common law
standards of fraud or misrepresentation or arising out of intentional
wrongdoing or gross negligence on the part of the Company.
B. BY THE BROKER. The Broker shall indemnify the Company against any
liability or loss incurred by the Company arising out of or in
connection with: (i) any violation by the Broker, its agents or
representatives of federal or state securities laws or regulations,
the rules of the NASD or common law standards of fraud or
misrepresentation; (ii) any violation by the Broker, its agents or
representatives of any of the terms of this Agreement; (iii) any
intentional wrongdoing or gross negligence on the part of the Broker,
its agents or representatives in the course of any activities or
conduct performed in relation to this Agreement; or (iv) any action
where the Broker, its agents or representatives improperly, illegally
or in breach of this Agreement held out to the public or to a customer
that the Broker, agent or representative was operating pursuant to
this Agreement or the authority of the Company. Any finding by a
court, regulatory body or arbitration panel that the Broker, its
agents or representatives engaged in any of the conduct described in
this subsection B. shall be conclusive evidence that the Company is
entitled to indemnification as set forth in this Section 7. Failure
of such a court,
<PAGE>
- 12 -
regulatory body or panel to make such a finding shall not preclude the
Company from alleging and putting forth proof on the issue.
C. NOTICE OF ACTION. After receipt by an indemnified party of notice of
the commencement of any action with respect to which a claim will be
made against an indemnifying party, such indemnified party shall
notify the indemnifying party promptly in writing of the commencement
of the action. The failure to so notify the indemnifying party shall
not relieve the indemnifying party from any liability which it may
otherwise have to any indemnified party except and to the extent the
indemnifying party is prejudiced thereby. In any such action where
the indemnified party has given the notice described in this Section
15, the indemnifying party shall be entitled to participate in and, to
the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume defense of the action with counsel
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying
party). After notice to such indemnified party that the indemnifying
party has elected to assume defense of the action, the indemnifying
party shall not be liable to such indemnified party for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense other than reasonable costs of
investigation.
8. ASSIGNABILITY
This Agreement shall not be assigned by either party without the written
consent of the other.
9. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut.
10. REVOCATION OF PRIOR AGREEMENTS
<PAGE>
- 13 -
A. This Agreement and any subsequent written amendments constitute the
entire agreement between the Company and Broker. This Agreement
terminates and supersedes all previous contracts, agreements or
arrangements made between the parties in connection with the Products
described in this Agreement.
B This Agreement does not, however, revoke any contracts, agreements or
arrangements under which commissions and service fees are due or will
become due the Broker for Company annuity or insurance contracts
issued prior to this Agreement's effective date. Notwithstanding this
exception to Section 10.A., the Company does not waive any claim of
any kind, whether for money or otherwise, against the Broker or any
obligation of the Broker under any prior contract, agreement or
arrangement with the Company.
11. SEVERABILITY
A. The provisions of this Agreement are severable, and if any provision
of this Agreement or any amendment to it is found to be invalid, such
provision shall not affect any other provision of the Agreement that
can be given effect without the invalid provision.
12. AMENDMENTS
A. The Company reserves the right to amend this Agreement at any time.
An amendment shall be effective thirty (30) days from the date notice
is given the Broker in accordance with Section 15.
B. No amendment made by the Broker shall be effective unless it is agreed
to in writing by the Company.
13. WAIVER
<PAGE>
- 14 -
Failure of either party to require performance of any provision of this
Agreement shall not constitute a waiver of that party's right to enforce
such provision at a later time. Waiver of any breach of any provision
shall not constitute a waiver of any succeeding breach.
14. TERMINATION
A. This Agreement shall terminate:
(1) If the Broker is dissolved, liquidated, or otherwise ceases
business operations;
(2) If the Broker fails, in the Company's sole judgment, to comply
with any of its obligations under this Agreement;
(3) If the Broker's annuity or insurance license or appointment to
represent the Company is terminated;
(4) If the Broker's SEC or NASD registration or membership is
suspended, terminated or otherwise limited so as to render the
Broker, in the Company's opinion, unable to perform its
obligations pursuant to this Agreement.
(5) If the Broker refuses to accept an amendment made in accordance
with Section 12; or
(6) At the end of any calendar year, beginning with _________________,
19___, during which the Broker fails to maintain a minimum
production level of $_________________ of annualized paid
deposits through the sale of annuity or life insurance
contracts under this Agreement.
B. The termination date of this Agreement for any of these reasons shall
be the date of occurrence.
<PAGE>
- 15 -
C. The Company and Broker shall have the right to terminate this
Agreement for any reason. Termination in accordance with this
provision shall be effective thirty (30) days from the date notice is
given in accordance with Section 15.
15. NOTICE
Any notice required by the terms of this Agreement or any exhibit hereto,
shall be valid if in writing and hand delivered, or sent by United
States mail postage prepaid, overnight delivery service or facsimile
transmission to the other party at the address provided below such party's
signature hereto.
16. HEADINGS
The headings in this Agreement are for reference purposes only and shall
not be deemed part of this Agreement or affect its meaning or
interpretation.
17. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which,
taken together, shall constitute one agreement, and any party hereto may
execute this Agreement by signing any such counterpart.
<PAGE>
- 16 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
By: ____________________________________
[title]
Address: 151 Farmington Avenue
_________________________________
Hartford, CT 06156
_________________________________
[BROKER]
By: ____________________________________
Address:_________________________________
_________________________________
<PAGE>
[AETNA - LOGO]
AETNA LIFE INSURANCE AND ANNUITY COMPANY
HOME OFFICE: 151 FARMINGTON AVE.
HARTFORD, CONNECTICUT 06156
1-800-525-4225
Aetna Life Insurance and Annuity Company, herein called Aetna, agrees to pay the
benefits stated in this Contract.
[FIGURE BOX]
THE VARIABLE FEATURES OF THIS CONTRACT ARE DESCRIBED IN PARTS III AND IV.
RIGHT TO CANCEL
The Contract Holder may cancel this Contract within 10 days of receiving it by
returning this Contract along with a written notice to Aetna at the above
address or to the agent from whom it was purchased. Within 7 days after it
receives the notice of cancellation and this Contract at its Home Office, Aetna
will return the entire consideration paid plus any increase or minus any
decrease in the current value of any funds allocated to the Separate Account.
This page, the following pages, and the application make up the entire Contract.
Signed at the Home Office on the Effective Date.
/s/ Lucille M. Nickerson /s/ Dan Kearney
SECRETARY PRESIDENT
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN
BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE
AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT
CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MAR-
KET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE
IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES
NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
G-CDA-IA (RP)
CAT. 2000616700
<PAGE>
SPECIFICATIONS
PLAN
CONTRACT HOLDER
GROUP CONTRACT NO.
EFFECTIVE DATE
THIS CONTRACT IS DELIVERED IN
AND IS SUBJECT TO THE LAWS OF THAT JURISDICTION
Guaranteed Interest Rate - There are guaranteed interest rates for amounts held
in the Fixed Account. (See 3.05) and the GA Account (See 3.04(c)).
Surrender Fee - There will be a charge deducted for early surrender. (See Part
V.)
Deductions from the Separate Account - There will be deductions for mortality
and expense risks and administrative fees. (See 3.09.)
Deduction from Purchase Payment(s) - Purchase Payment(s) are subject to a
deduction for applicable premium taxes. (See 3.01.)
This Contract is a legal contract and constitutes the entire legal relationship
between Aetna and the Contract Holder.
READ THIS CONTRACT CAREFULLY. This Contract sets forth, in detail, all of the
rights and obligations of both you and Aetna. IT IS, THEREFORE, IMPORTANT THAT
YOU READ THIS CONTRACT CAREFULLY.
2
<PAGE>
TABLE OF CONTENTS
I. GENERAL DEFINITIONS
PAGE
1.01 Annuity . . . . . . . . . . . . . . . . . . . . . . . . .5
1.02 Fixed Annuity . . . . . . . . . . . . . . . . . . . . . .5
1.03 Variable Annuity. . . . . . . . . . . . . . . . . . . . .5
1.04 Plan. . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.05 Annuitant . . . . . . . . . . . . . . . . . . . . . . . .5
1.06 Participant . . . . . . . . . . . . . . . . . . . . . . .5
1.07 Purchase Payment(s) . . . . . . . . . . . . . . . . . . .5
1.08 General Account . . . . . . . . . . . . . . . . . . . . .5
1.09 Separate Account. . . . . . . . . . . . . . . . . . . . .5
1.10 Fixed Account . . . . . . . . . . . . . . . . . . . . . .5
1.11 Fund(s) . . . . . . . . . . . . . . . . . . . . . . . . .5
1.12 Guaranteed Accumulation Account (GA Account). . . . . . .5
1.13 Nonunitized Separate Account. . . . . . . . . . . . . . .5
1.14 Maturity Date . . . . . . . . . . . . . . . . . . . . . .5
1.15 Matured Term Value. . . . . . . . . . . . . . . . . . . .5
1.16 Valuation Period. . . . . . . . . . . . . . . . . . . . .5
II. GENERAL PROVISIONS
2.01 Change of Contract. . . . . . . . . . . . . . . . . . . .6
2.02 Change of Fund(s) . . . . . . . . . . . . . . . . . . . .6
2.03 Nonparticipating Contract . . . . . . . . . . . . . . . .6
2.04 Payments. . . . . . . . . . . . . . . . . . . . . . . . .6
2.05 State Laws. . . . . . . . . . . . . . . . . . . . . . . .6
2.06 Control of Contract . . . . . . . . . . . . . . . . . . .7
2.07 Designation of Beneficiary. . . . . . . . . . . . . . . .7
2.08 Misstatements and Adjustments . . . . . . . . . . . . . .7
2.09 Incontestability. . . . . . . . . . . . . . . . . . . . .7
2.10 Grace Period. . . . . . . . . . . . . . . . . . . . . . .7
2.11 Individual Certificates . . . . . . . . . . . . . . . . .8
III. PURCHASE PAYMENT,
CURRENT VALUE, AND SURRENDER PROVISIONS
3.01 Net Purchase Payment(s) . . . . . . . . . . . . . . . . .9
3.02 Individual Accounts . . . . . . . . . . . . . . . . . . .9
3.03 Limitation on Contributions . . . . . . . . . . . . . . .9
3.04 Guaranteed Accumulation Account . . . . . . . . . . . . .9
3.05 Guaranteed Interest Rate - Fixed Account. . . . . . . . 13
3.06 Experience Credits. . . . . . . . . . . . . . . . . . . 13
3.07 Maintenance Fee . . . . . . . . . . . . . . . . . . . . 13
3.08 Fund Record Units - Separate Account. . . . . . . . . . 13
3.09 Net Return Factor(s) - Separate Account . . . . . . . . 13
3.10 Fund Record Unit Value - Separate Account . . . . . . . 13
3.11 Current Value . . . . . . . . . . . . . . . . . . . . . 13
3.12 Transfer of Current Value from the Funds to GA Account. 14
3.13 Transfer of Current Value from the Fixed Account. . . . 14
3
<PAGE>
3.14 Loan Value. . . . . . . . . . . . . . . . . . . . . . . 14
3.15 Notice to the Contract Holder . . . . . . . . . . . . . 16
3.16 Distribution Options. . . . . . . . . . . . . . . . . . 16
3.17 Sum Payable at Death (Before Annuity Payments Start). . 19
3.18 Surrender Value . . . . . . . . . . . . . . . . . . . . 19
3.19 Surrender Restrictions. . . . . . . . . . . . . . . . . 19
3.20 Timing of Distributions . . . . . . . . . . . . . . . . 20
3.21 Payment of Surrender Value. . . . . . . . . . . . . . . 20
3.22 Reinstatement . . . . . . . . . . . . . . . . . . . . . 21
IV. ANNUITY PROVISIONS
4.01 Choices to be Made. . . . . . . . . . . . . . . . . . . 22
4.02 Annuity Payments to Annuitant:. . . . . . . . . . . . . 22
4.03 Death of Annuitant. . . . . . . . . . . . . . . . . . . 22
4.04 Fund(s) Annuity Units - Separate Account. . . . . . . . 23
4.05 Fund(s) Annuity Unit Value - Separate Account . . . . . 23
4.06 Annuity Options . . . . . . . . . . . . . . . . . . . . 23
V. FEE SCHEDULE
5.01 Maintenance Fee . . . . . . . . . . . . . . . . . . . . 33
5.02 Surrender Fee . . . . . . . . . . . . . . . . . . . . . 33
4
<PAGE>
I. GENERAL DEFINITIONS
1.01. ANNUITY: Payment of an income:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.02. FIXED ANNUITY: An Annuity with payments which do not vary in amount.
1.03. VARIABLE ANNUITY: An Annuity with payments which vary with the net
investment results of a Separate Account.
1.04. PLAN: The Plan named on the Specifications page. The Plan is not a part
of the Contract. Aetna is not bound by the terms of the Plan.
1.05. ANNUITANT: A person on whose life an Annuity has been effected under
this Contract.
1.06. PARTICIPANT: A person who participates in the Plan named on the
Specifications page of this Contract.
1.07. PURCHASE PAYMENT(S): Payments made to Aetna.
1.08. GENERAL ACCOUNT: The Account holding the assets of Aetna, other than
those assets held in Separate Accounts or the Nonunitized Separate
Account.
1.09. A SEPARATE ACCOUNT: An account which buys and holds shares of the
Fund(s). Income, gains or losses, realized or unrealized are credited
or charged to this account without regard to other income, gains or
losses of Aetna. Aetna owns the assets held in a Separate Account and is
not a trustee as to such amounts. These accounts generally are not
guaranteed and is held at market value. The assets of such accounts, to
the extent of reserves and other contract liabilities of the account,
shall not be charged with other Aetna liabilities.
1.10. FIXED ACCOUNT: An accumulation option with a guaranteed minimum interest
rate. Aetna may credit a higher rate which is not guaranteed.
1.11. FUND(S): The open-end registered management investment companies
(mutual funds) made available by Aetna under this Contract.
1.12. GUARANTEED ACCUMULATION ACCOUNT: An accumulation option which guarantees
a stipulated rate of interest for a specified period of time.
1.13. NONUNITIZED SEPARATE ACCOUNT: An Account set up by Aetna under Title
38, Section 38-154a, of the Connecticut General Statutes which is used to
hold assets for GA Account Terms greater than three years. The Contract
Holder does not participate in the investment gain or loss from the
assets held in this Account.
1.14. MATURITY DATE: The last day of a GA Account Term.
1.15. MATURED TERM VALUE: The amount payable on a GA Account Term's Maturity
Date.
1.16. VALUATION PERIOD: The period as time from the end of one business day on
the New York Stock Exchange to the end of the next business day.
5
<PAGE>
II. GENERAL PROVISIONS
2.01. CHANGE OF CONTRACT: Except as provided below, only an authorized officer
of Aetna may change the terms of the Contract by notifying the Contract
Holder, in writing, at least 30 days before the effective date of the
change. Any change will not affect the amount or terms of any Annuity
which begins before the change.
Aetna may make a change that affects the GA Account Market Value
Adjustment (see 3.04(g)) with at least 30 days advance written notice to
the Contract Holder. Any such change shall become effective for any
present or future Participant.
Any change that affects the following provisions of this Contract will
not apply to existing Individual Accounts.
(a) Net Purchase Payment(s)
(b) Guaranteed GA Account Interest Rate
(c) Guaranteed Interest Rate - Fixed Account
(d) Net Return Factor(s) - Separate Account
(e) Current Value
(f) Surrender Value
(g) Fund(s) Annuity Unit Value - Separate Account.
Any change that affects the Annuity Options and the tables for the
Options cannot be made:
(1) Until at least 12 months after the Effective Date of this Contract;
and
(b) Until at least 12 months after the effective date of any such prior
change.
New Participants covered under this Contract on or after the effective
date of any change will be subject to the change. If the Contract Holder
does not agree to any change under this provision, no new Participants
will be covered under this Contract. Aetna will continue to accept
Purchase Payments for the Participants covered under this Contract before
the change. This Contract may also be changed as required by federal or
state law.
2.02. CHANGE OF FUND(S): Aetna, or the Separate Account may:
(a) Change the Fund(s) which may be invested in by the Separate
Account; and
(b) Replace the shares of any Fund(s) held in the Separate Account with
shares of any other Fund(s).
Changes must be:
(a) Approved by a majority vote of persons having an interest in the
Separate Account and the Fund(s);
(b) Deemed necessary by Aetna under the Investment Company Act of 1940;
or
(c) Deemed necessary by Aetna to accomplish the purpose of the Separate
Account.
Aetna will notify the Contract Holder of any change.
2.03. NONPARTICIPATING CONTRACT: The Contract Holder, Participants, or
beneficiaries will not have a right to share in the earnings of Aetna.
2.04. PAYMENTS: Aetna will make Annuity pay-ments as and when due. Aetna will
make other payments within 7 days of receipt at its Home Office of a
written claim for payment which is in good order, except as provided in
3.18.
2.05. STATE LAWS: This Contract complies with the laws of the state in which
it is delivered. Any cash, death or Annuity payments are equal to or
greater than the minimum re-quired by such laws. Annuity tables for
legal reserve valuation shall be as required by state law. Such tables
may be different from Annuity tables used to determine Annuity payments.
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2.06. CONTROL OF CONTRACT: The Contract Holder may make any choices allowed by
this Contract for the Employer Account and the Employee Account.
Choices made under this Contract must be in writing or in a form
satisfactory to Aetna. Until receipt of such choices in its Home Office,
Aetna may rely on any previous choices made. The Contract Holder may,
however, by written direction to Aetna, allow Participants to select the
investment options of the Employer Account and/or the Employee Account.
No distributions will be made from the Employer Account or the Employee
Account without the Contract Holder's written direction to Aetna. The
Contract Holder may direct Aetna to make an in-service transfer pursuant
to IRS Revenue Ruling 90-24. Checks for in-service transfers will be
made payable only to the acquiring investment provider. Participants
have no rights to direct Aetna as to payments under the Contract unless
countersigned by the Contract Holder.
(a) Nontransferable and Nonassignable:
This Contract and any Individual Accounts are nontransferable and
non-assignable, except to Aetna in the event of a loan or pursuant
to a "qualified domestic relations order" as set forth under the
Retirement Equity Act of 1984 (REA). In the event a loan is
requested, the Current Value of the Employee Account necessary to
cover the loan amount plus interest must be assigned to Aetna.
(b) ERISA/REA Requirements:
The Contract Holder shall notify Aetna in writing of the
applicability of Title I of the Employee Retirement Income Security
Act of 1974 (ERISA), as amended by subsequent law including REA, to
the Plan. Aetna shall rely on the Contract Holder's determination
and representation of applicability. With respect to any
distribution made from an Employee or Employer Account from a
Contract subject to ERISA, the Contract Holder must certify in
writing that all the appropriate REA requirements have been met and
that the distribution is in accordance with the terms of the Plan.
(c) Participant Rights/Employee Account:
The Participant has a nonforfeitable right to the value of his or
her Employee Account pursuant to Code Section 403(b) and the terms
of the Plan as interpreted by the Contract Holder (see 1.06).
(d) Participant Rights/Employer Account:
The Participant has a nonforfeitable right to the value of his or
her Employer Account pursuant to the terms of, and to the extent of
his or her vested percentage under, the Plan as interpreted by the
Contract Holder. It is the Contract Holder's responsibility to
maintain records of the Participant's vesting percentages. Aetna
will not maintain nor keep such records.
The Contract Holder and each Participant hereunder have agreed in writing
to the above terms and conditions, to have the Contract Holder make all
choices under the Contract, and to be bound by the Contract Holder's
direction(s) to Aetna.
2.07. DESIGNATION OF BENEFICIARY: The Contract Holder is the beneficiary of
the Employer and Employee Account. Aetna will pay any portion of the
Individual Account(s) Current Value to the Plan beneficiary as directed
by the Contract Holder.
2.08. MISSTATEMENTS AND ADJUSTMENTS: If Aetna finds the age of any payee to be
misstated, the correct facts will be used to adjust payments.
2.09. INCONTESTABILITY: Aetna cannot cancel this Contract because of any error
of fact on the application.
2.10. GRACE PERIOD: This Contract will remain in effect even if Purchase
Payments are not continued.
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2.11. INDIVIDUAL CERTIFICATES: Aetna shall issue certificates to the Contract
Holder or Participants as required by the state in which this Contract
is delivered. The certificate will summarize certain provisions of the
Contract. Certificates are for information only and are not a part of
the Contract.
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III. PURCHASE PAYMENT, CURRENT
VALUE, AND SURRENDER PROVISIONS
3.01. NET PURCHASE PAYMENT(S): The actual Purchase Payment less any premium
tax. Generally, Aetna will deduct the premium tax when Annuity benefits
are purchased (see Part IV). If Aetna determines that a premium tax is
due when Purchase Payments are received or at any other time, it will
deduct the tax at that time.
The Net Purchase Payment(s) will be credited among:
(a) The Fixed Account; and
(b) The Guaranteed Accumulation Account; and
(c) The Fund(s) in which the Separate Account invests.
Aetna must be told the percentage of the Net Purchase Payment(s) to be
applied to each investment above.
During any calendar year, the Contract Holder or, if allowed by the Plan,
the Participant may tell Aetna to change the investment mix twelve times.
Should Aetna allow additional changes, each may be subject to a fee of up
to $10.
3.02. INDIVIDUAL ACCOUNTS: This Contract is issued to the Contract Holder.
However, Individual Accounts for Plan Participants are explained below.
Aetna will maintain two Individual Accounts for each Participant. These
will be:
(a) Employer Account: This Individual Account will be credited with
employer Net Purchase Payment(s); and
(b) Employee Account: This Individual Account will be credited with
employee Net Purchase Payment(s), specifically employee salary
reduction contributions.
In addition to any Purchase Payment(s) stated to be made to this
Contract, a lump-sum Purchase Payment(s), of not less than a minimum
amount stated by Aetna, may be made on behalf of one or more
Participants. Aetna may maintain an Individual Account for each
lump sum payment. Such Individual Account(s) will be designated as
an Employer Account(s) or an Employee Account(s) as instructed by
the Contract Holder.
3.03. LIMITATION ON CONTRIBUTIONS: The Purchase Payment(s) made to a
Participant's Individual Account(s) in any year cannot exceed the lesser
of the amount determined under the exclusion allowance of Code Section
403(b)(2) or the annual additions limitation of Code Section 415(c)(1).
In addition, in no event may the Purchase Payment(s) attributable to
elective deferrals as defined in Code Section 402(g) exceed $9,500 (or,
such larger amount as adjusted by the Secretary of the Treasury) during
any calendar year, unless the alternate limitation of Code Section
402(g)(8) applies.
3.04. GUARANTEED ACCUMULATION ACCOUNT (GA ACCOUNT): The GA Account guarantees
stipulated rates of interest for stated periods of time (see (a) and (c)
below). Amounts withdrawn before the end of a Guaranteed Term may be
subject to a Market Value Adjustment (MVA) (see (g) below).
(a) Deposit Period - A calendar month, a calendar quarter, or any other
period of time specified by Aetna during which Net Purchase
Payment(s) and transfers are accepted into the GA Account for one or
more Guaranteed Terms.
(b) Guaranteed Term (Term) - The period of time for which interest rates
are guaranteed on Net Purchase Payment(s) and on transfers made
into a Deposit Period of the GA Account. Terms are offered at
Aetna's discretion for various lengths of time ranging up to and
including ten years.
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(c) Guaranteed Term Classifications - The grouping of Terms according to
their time to maturity. The following are the Classifications:
(1) Short-Term: Terms of up to and including 3 years; or
(2) Long-Term: Terms of greater than 3 years and up to and
including 10 years.
During a Deposit Period, Aetna may make available one or more Terms
within a Classification. The Contract Holder has the option to
allocate Net Purchase Payment(s) and transfers into any or all of
the available Deposit Period Terms. If no specific direction is
given, Net Purchase Payment(s) and transfers will go into available
Terms on a pro rata basis within the Classification(s) previously
chosen by the Contract Holder. At least one Term in the Short-Term
Classification will be available each Deposit Period.
(d) Guaranteed GA Account Interest Rates (Guaranteed Rates) - Aetna
will declare all interest rate(s) applicable to a specific Term at
the start of the Deposit Period for that Term. These rate(s) are
guaranteed by Aetna for that Deposit Period and the ensuing Term and
are not based on the actual investment experience of the underlying
assets in the GA Account. The Guaranteed Rates are annual effective
yields. The interest is credited daily at a rate that will produce
the guaranteed annual effective yield over the period of a year. No
annual rate will ever be less than 4%.
For Terms of one year or less, one Guaranteed Interest Rate is set
and announced for that full Term. For other Terms, there may be two
or more rates.
The rate(s) will be set and announced prior to the Deposit Period
for that Term and will not be subject to change.
(e) Withdrawals from GA Account - Full or partial surrenders may be
requested at any time from the GA Account. However, amounts
withdrawn prior to the Maturity Date of a Term to satisfy a
surrender request may be subject to an MVA (see (g) below).
Full and partial surrenders are satisfied by withdrawing amounts
from each of the investment options in which the Individual Account
is invested (the Fund(s), the Fixed Account, the GA Account Short-
Term Classification and the GA Account Long-Term Classification) on
a pro rata basis. However, the Contract Holder may specify a par-
ticular order in which investment options will be liquidated in
order to satisfy a partial surrender request.
For purposes of withdrawals, Terms within the GA Account Short-Term
and Long-Term Classifications are considered as two separate
investment options. Amounts will be removed within a GA Account
Classification starting with the Term still in effect with the
oldest Deposit Period. Any withdrawal which is a surrender will be
subject to the Maintenance Fee and Surrender Fee as appropriate.
Amounts may be transferred at any time subject to Contract
specifications (see 3.11, 3.12 or 3.13 below). Amounts transferred
prior to the Maturity Date of a Term are subject to an MVA (see (g)
below). Fund(s) will be removed within the elected Classification
starting with the Term still in effect with the oldest Deposit
Period.
During the Deposit Period and the 90 days following the close of the
Deposit Period, any amounts applied to the GA
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Account during that Deposit Period may not be withdrawn unless due
to:
(1) A full or partial surrender;
(2) A payment of a premium for an Annuity Option; or
(3) The Sum Payable at Death provision.
(f) Maturity Date/Reinvestment - For all GA Account Term(s) existing as
of the effective date of this endorsement in addition to GA Account
Term(s) announced subsequent to that date, the Contract Holder or
Participant, as applicable, will be mailed a notice at least 18
calendar days before a Term's Maturity Date. This notice will
contain the current Deposit Period's Guaran-teed Rate(s), Term(s)
and a projected Matured Term Value.
The Matured Term Value may be surrendered or transferred on the
Term's Maturity Date without an MVA. If no specific direction is
given by the Con-tract Holder or Participant, as applicable, prior
to the Maturity Date, each Matured Term Value will be reinvested in
a Term of the same duration. In the event that a Term of the same
duration is unavailable, each Matured Term Value will automatically
be reinvested in the next shortest Term available in the same
Classification during the then current Deposit Period. If however,
only one Term is available within the Classification, then the
Matured Term Value will automatically be reinvested in that Term.
Within two business days after the Maturity Date, the Contract
Holder or Participant, as applicable, will be mailed a confirmation
statement. This statement will state the Terms and Guaranteed Rates
which will apply to the reinvested Matured Term Value.
During the calendar month following the Term's Maturity Date, one
exception is allowed to the 90 day transfer restriction and MVA
under (e) and (g). This exception is applicable to each Matured
Term Value plus any interest accrued thereon, provided no part of
the Matured Term Value was transferred on the Maturity Date.
During this calendar month period, the Contract Holder may notify
Aetna's Home Office to transfer or surrender all or part of the
Matured Term Value plus any interest accrued thereon from the GA
Account without an MVA. This provision only applies to the first
such request received from the Contract Holder during this period
for any Matured Term Value. The Matured Term Value plus any
interest accrued thereon may be transferred upon such request
without an MVA:
(1) To any other Terms of the GA Account available in the current
Deposit Period; or
(2) To any other allowable Fund(s).
If no such notification is given, the Matured Term Value will remain
subject to the terms and conditions of the new Term. All surrender
and transfer requests will be processed as of the date they are
received in good order at Aetna's Home Office.
(g) Market Value Adjustment (MVA) - There will be an MVA for a
withdrawal from the GA Account before the end of a Term when the
withdrawal is due to:
(1) A transfer;
(2) A full or partial surrender; or
(3) A payment of a premium for Annuity Option 2.
The amount of the withdrawal will be adjusted to a market value
amount as described below.
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The market value adjusted amount will be equal to the amount
withdrawn multiplied by the following ratio:
x
---
(1 + i) 365
-----------
x
---
(1 + j) 365
-----------
Where: i is the Deposit Yield
j is the Current Yield
x is the number of days remaining, (computed from
Wednesday of the week of withdrawal) in the Guaranteed
Term.
The Deposit Period Yield will be determined as follows:
- At the close of the last business day of each week of the
Deposit Period, a yield will be computed as the average of the
yields on that day of U.S. Treasury Notes which mature in the
last three months of the Guaranteed Term.
- The Deposit Period Yield is the average of those yields for the
Deposit Period. If withdrawal is made prior to the close of
the Deposit Period, it is the average of those yields on each
week preceding withdrawal.
The Current Yield is the average of the yields on the last business
day of the week preceding withdrawal on the same U.S. Treasury Notes
included in the Deposit Period Yield.
In the event that no U.S. Treasury Notes which mature in the last
three months of the Guaranteed Term exist, Aetna reserves the right
to use the U.S. Treasury Notes that mature in a following quarter.
Full and partial surrenders as well as transfers made within six
months on the date of death of the Participant under the Sum Payable
at Death provision will be the greater of:
- The aggregate MVA amount which is the sum of all market value
adjusted amounts calculated due to a withdrawal of amounts (for
surrender or transfer) from Terms prior to the end of those
Terms. The aggregate MVA may be either positive or negative;
or
- The applicable portion of the Current Value in the GA Account.
After the six month period, the surrender or transfer will be the
aggregate MVA amount (i.e., including all MVAs).
The greater of the aggregate MVA amount or the applicable portion of
the Current Value in the GA Account is applied to amounts withdrawn
from the GA Account for payment of a premium under Annuity Options 3
or 4.
Aetna may make any change to Section 3.02 or 3.03 with 30 days
advance written notice to the Contract Holder. Any such change
shall become effective for Purchase Payment(s), transfers or rein-
vestments made to any new Term by any present or future Participant.
(h) Deposits to the GA Account - All amounts in the GA Account under
the Short-Term Classification are made to the General Account.
All amounts in the GA Account under the Long-Term Classifications
are made to a Nonunitized Separate Account. There are no discrete
units for this Non-unitized Separate Account. The Contract Holder
or Participant, as applicable, does not participate in the gain or
loss from the assets held in the Non-unitized Separate Account.
Such gain or loss is borne entirely by Aetna. These assets may be
chargeable with liabilities arising out of any other business of
Aetna.
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For terms under both the Short-Term and Long-Term Classifications,
Aetna guarantees stipulated interest rates to be credited to the GA
Account. All assets of Aetna including amounts made to the GA
Account are available to meet the guarantees under the GA Account.
3.05. GUARANTEED INTEREST RATE - FIXED ACCOUNT: On any Purchase Payment(s)
made to the Fixed Account, Aetna will add interest daily at any annual
rate no less than 4%. Aetna may add interest daily at any higher rate
determined by its Board of Directors.
3.06. EXPERIENCE CREDITS: Aetna may apply Experience Credits under this
Contract. Any such Credits will be computed as decided by Aetna.
3.07. MAINTENANCE FEE: The Maintenance Fee (see 5.01) will be deducted from
the Current Value of the Employee and Employer Account on each
anniversary of the Individual Account effective date and upon surrender
of the entire Individual Account unless other-wise directed by the
Contract Holder.
3.08. FUND(S) RECORD UNITS - SEPARATE ACCOUNT: The portion of the Net
Purchase Payment(s) applied to the Separate Account will determine the
number of Fund's Record Units. This number is equal to a Net Pur-chase
Payment applied to the Fund divided by the Fund Record Unit Value (see
3.10) for the Valuation Period in which the Pur-chase Payment is received
in good order.
3.09. NET RETURN FACTOR(S) - SEPARATE ACCOUNT: The Net Return Factors are
used to compute all Separate Account Values and payments for any Fund.
The Net Return Factor for each Fund is equal to 1.0000000 plus the Net
Return Rate.
The Net Return Rate is equal to:
(a) The value of the shares of the Fund held by the Separate Account at
the end of a Valuation Period; minus
(b) The value of the shares of the Fund held by the Separate Account at
the start of the Valuation Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account (if any);
divided by
(d) The total value of the Fund Record Units and Fund Annuity Units of
the Separate Account (see 3.10 and 4.06) at the start of the
Valuation Period; minus
(e) A daily actuarial charge at an annual rate of 1.25% for Annuity
mortality and expense risks and profit and a daily administrative
charge which will not exceed 0.25% on an annual basis. The
administrative charge may be changed annually except for amounts
which have been used to purchase an Annuity.
A Net Return Rate may be more or less than 0.
The value of a share of the Fund is equal to the net assets of the Fund
divided by the number of shares outstanding.
3.10. FUND RECORD UNIT VALUE - SEPARATE ACCOUNT: Each Fund's Record Unit Value
is computed by multiplying the Net Return Factor for the current
Valuation Period by the Fund's Record Unit Value for the previous Period.
The dollar value of a Fund's Record Unit, Separate Account assets, and
Variable Annuity payments may go up or down due to investment gain or
loss.
3.11. CURRENT VALUE: The Current Value is equal to:
(a) Any amounts in the Fixed Account, including Fixed Account interest
added by Aetna; plus
(b) Any amounts in the GA Account, including GA Account interest added
by Aetna; plus
(c) The sum of any Separate Account Record Unit Value(s); plus
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(d) Any amount due to Experience Credits; less
(e) Any Maintenance Fee(s) due.
Current Value does not include amounts used to purchase an Annuity.
3.12. TRANSFER OF CURRENT VALUE FROM THE FUNDS OR GA ACCOUNT: Before an
Annuity Option is elected, all or any portion of the Current Value may be
transferred from any Fund or the GA Account to:
(a) Any other Fund;
(b) The Fixed Account; or
(c) The GA Account's current Deposit Period.
Amounts in a specific GA Account Term cannot be transferred to the
Deposit Period of another Term within the same Classification except at
the Term's Maturity.
Amounts applied to Classifications of the GA Account may not be
transferred to the Fund(s) during the Deposit Period or for 90 days after
the close of the Deposit Period.
Transfers from the GA Account are subject to the Withdrawal and Market
Value Ad-justment provisions. (See 3.04(e) and (g).)
For each Individual Account, twelve trans-fers of Current Value
(excluding transfers from the GA Account at the end of a Guaranteed Term)
can be made during a calendar year period. Should Aetna allow additional
transfers, each may be subject to a fee of up to $10.
3.13. TRANSFER OF CURRENT VALUE FROM THE FIXED ACCOUNT: Before an Annuity
Option is elected, 10% of the Current Value held in the Fixed Account may
be transferred to any Fund(s). Such transfer will be:
(a) Without charge; and
(b) Allowed once per calendar year.
Aetna may, on a temporary basis, allow any larger percent to be
transferred. The Current Value of the Fixed Account, as used above, is
the value when the request is received at the Home Office of Aetna.
3.14. LOAN VALUE: During the accumulation period, the Contract Holder may
request a loan on behalf of a Participant from the Employee Account by
submitting a loan request form to Aetna's Home Office. If there is more
than one Employee Account, a separate loan request form is required for
each Employee Account. If a Contract is subject to ERISA, the Contract
Holder must provide written certification to Aetna that the REA
requirements have been satisfied before the loan will be made. A loan
for any Participant will not be allowed within 12 months from the date of
any prior loan for that Participant. The Loan Effective Date will be
the date the Home Office receives the loan request form and, if required,
certification of REA compliance, in good order. All loans are subject to
the following conditions:
(a) The minimum Employee Account Cur-rent Value must be $2,000. The
loan amount must be at least $1,000. The loan amount may not exceed
the lesser of:
(1) 50% of the Employee Account Cur-rent Value reduced by any out-
standing loan balance(s) on the date on which the loan is made;
or
(2) $50,000 reduced by the highest outstanding balance(s) of loans,
during the preceding 12 months ending on the day before the
current loan is made.
(b) The values in the Fund(s), Fixed Account and GA Account are included
in determining the Employee Account Current Value for purposes of
paragraph (a). However, only amounts held in the Fund(s) and Fixed
Account are available for making the actual loan from the Employee
Account. If a Con-
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tract Holder intends to request a loan in excess of the Current
Value of the Fund(s) and the Fixed Account in the Employee Account,
the excess amount must first be transferred from the GA Account to
any other Fund(s) or to the Fixed Account. Amounts transferred from
the GA Account will be subject to the GA Account withdrawal and
Market Value Adjustment (MVA) provisions (see 3.04(e) and (g)).
Aetna reserves the right to restrict or limit the amount that may be
loaned from any investment option at any time.
When a loan is made, the number of accumulation units equal to the
loan amount will be withdrawn from the Employee Account. The
amount of the loan to be made will be withdrawn on a pro rata basis
from the Fixed Account and from each of the Fund(s). Accumulation
units withdrawn from the Employee Account to provide a loan do not
participate in the investment experience of the investment options
from which they were withdrawn.
(c) On the first business day of each calendar month, Aetna will
determine a Loan Interest Rate. This rate will be equal to Moody's
Corporate Bond Yield Average-Monthly Average Corporates as published
by Moody's Investors Service, Inc. for the calendar month be-ginning
two months before the date on which the new Loan Interest Rate is
effective. The Loan Interest Rate for the calendar month in which
the loan is effective will apply for one year from the Loan
Effective Date. Annually on the anniversary of the Loan Effective
Date, the rate will be adjusted to equal the Loan Interest Rate
determined for the month in which the loan anniversary occurs.
(d) Principal and interest on loans must be amortized in quarterly
installments over a 5-year term. If the Loan Interest Rate is
adjusted, future repayments will be adjusted so that the outstanding
loan balance is amortized in equal quarterly installments over the
remaining term. A quarterly processing fee equal to .74% of the
outstanding loan balance will be deducted from each repayment and
re-tained by Aetna. The remainder of each repayment will be
credited to the Employee Account. Repayment amounts credited to the
Employee Account will be allocated among the same investment
options and in the same proportions as amounts were withdrawn to
make the loan.
(e) A bill in the amount of the quarterly repayment due will be mailed
to the Participant in advance of the repayment due date. The
repayment due date will be the first business day of the third
calendar month following the 7th calendar day after the loan
effective date. The repayment will be in default if it is not
received by Aetna at its Home Office before the end of the month in
which the due date falls.
(f) If a repayment is in default, an amount equal to the repayment
amount and any applicable Surrender Fee will be deducted from the
Employee Account as a deemed partial surrender. The date of the
surrender will be the first business day following the last day of
the month in which the repayment was due. The surrendered amount
will automatically be applied to make the repayment that is in
default and will thereafter be subject to (d).
(g) If a repayment is received in excess of a billed amount, the excess
will be applied towards the Employee Account principal portion of
the outstanding loan. Repayments received which are less than the
billed amount will be returned to the Participant; therefore, the
repayment will be in default and (f) will apply.
(h) Prepayment of the entire loan will be allowed. At the time of
prepayment,
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Aetna will bill the Participant for any accrued Loan Interest, which
will be applied in accordance with (d). Aetna will consider the
loan paid when this amount is received.
(i) If the Employee Account is surrendered while there is an outstanding
loan balance, accrued Loan Interest and any applicable Surrender Fee
will be deducted from the Employee Account Current Value.
(j) Upon the election of an Annuity Option or the Participant's death,
the loan will be canceled resulting in a distribution of the
outstanding loan balance. Accrued Loan Interest will be deducted
from the Employee Account Current Value and this interest will then
be treated as a quarterly repayment under (d).
3.15. NOTICE TO THE CONTRACT HOLDER: Aetna will notify the Contract Holder
each year of:
(a) The value of any amounts held in:
(1) The Fixed Account;
(2) The GA Account;
(3) The Fund(s) for the Separate Account;
(b) The number of any Fund(s) Record Units;
(c) The Fund(s) Record Unit Value(s); and
(d) The Surrender Values of these amounts.
Such number or values will be as of a date no more than 60 days before
the date of the notice.
3.16. DISTRIBUTION OPTIONS: The following distribution options may be elected
by the Contract Holder on behalf of the Participant.
(a) Estate Conservation Option (ECO): A distribution option under which
a portion of the Individual Account(s) Current Value will
automatically be surrendered and distributed each year.
(1) An ECO payment will be determined in the following manner:
a. Payments will commence no earlier than the year in which
the Participant attains age 70 1/2, and will be calculated
on the full Current Value of the Individual Account(s),
except as provided in "b".
b. If Aetna maintains separate records of the value of the
account as of December 31, 1986, (see below), payments
made on or after the year in which the Participant attains
age 70 1/2 and before the year in which the Participant
attains age 75 will only be calculated on amounts
contributed after December 31, 1986, plus all interest
credited on all amounts after that date. The method under
this rule is elected by the Contract Holder and will no
longer be effective if the Contract Holder submits a
withdrawal request in addition to a scheduled ECO pay-
ment from the Individual Account(s), at which time ECO
payments will then be determined under "a".
Aetna will maintain separate records if the Contract
Holder has not requested any withdrawals from the
Participant's Individual Account(s) since December 31,
1986. If a Participant attained age 70 1/2 prior to 1988
or is a Participant in a governmental or church plan, the
Participant must be retired in order to qualify under "b".
(2) Amount of Distribution: Each year that ECO is in effect, Aetna
will calculate and distribute an amount equal to the minimum
required distribution under the Code. The annual distribution
will be determined by dividing the Individual Account(s)
Current Value, including
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any current loan(s) outstanding, as of December 31 of the year
prior to the year for which the payment is to be made, by a
life expectancy factor.
As elected by the Contract Holder, the factor is either the
single life or joint life expectancy based on tables in Section
401(a)(9) of the Code or related regulations. If joint life
expectancy is elected and the Participant or spouse dies, pay-
ments will be calculated based on the survivor's life
expectancy.
These calculations may be changed as necessary to comply with
the Code minimum distribution rules. The joint life expectancy
factor can only be elected based on the joint life expectancy
of the Participant and his or her spouse, and such spouse must
be named as the Plan beneficiary of any death benefits under
the Contract while ECO is in effect.
(3) Minimum Current Value: At its discretion, Aetna may require a
minimum initial Current Value for election of this option.
If after election of this option the Current Value is
insufficient to make a scheduled ECO payment, Aetna will
distribute the entire balance of the Individual Account(s).
(4) Date of Distribution: The Contract Holder shall specify the
initial distribution date. The earliest date is the first day
of the calendar year in which the Participant attains age 70
1/2. Subsequent distributions will be made annually on the
15th of the month the initial payment was made or such other
date Aetna may designate or allow.
(5) Elections and Revocation: ECO may be elected by the Contract
Holder, on behalf of the Participant, by submitting a completed
and signed election form to Aetna's Home Office. If the
Contract Holder has notified Aetna that the Plan is subject to
Title I of the Employee Retirement Income Security Act of 1974
as amended, the Contract Holder must also certify in writing
that all the appropriate REA requirements have been met and
that the distribution is in accordance with the terms of the
Plan.
Once elected, this option may be revoked by the Contract Holder
by submitting a written request to Aetna at its Home Office.
Any revocation will apply only to amounts not yet paid. ECO
may be elected only once per participant.
(6) Reservation of Rights: Aetna reserves the right to change the
terms of ECO for future elections and discontinue the
availability of this option after proper notification. Aetna
also reserves the right to allow payments to be made more
frequently than annually.
(b) Systematic Withdrawal Option (SWO): A distribution option under
which a portion of the Individual Account(s) Current Value
attributable to a particular Participant will automatically be
surrendered and distributed each year.
(1) Amount of Distribution: The Contract Holder may elect one of
the two payment methods described below.
(a) Specified Amount: Payments of a designated dollar amount
which must be no greater than 10% of the initial Current
Value and shall remain con-stant unless a higher amount is
required under Code mini-mum distribution rules. Each
year that the Specified Amount is in effect, Aetna will
calculate
17
<PAGE>
the minimum required distribution under the Code and
distribute this amount if it is larger than the amount
elected by the Contract Holder. The life expectancy
factor for this purpose will be the Participant's life
expectancy at the time of the election of this option, and
with each subsequent calendar year the factor will be
reduced by one. The minimum required distribution will be
determined by dividing the Individual Account Current
Value, including any current loan(s) outstanding, as of
December 31 of the year prior to the year for which the
pay-ment is to be made, by a life expectancy factor. At
its discretion, Aetna may require a minimum initial
payment amount; or
(b) Specified Period: Payments which are made over a period
of time which must be at least 10 years, unless otherwise
required by Code minimum distribution rules. The
maximum specified period will be limited by the Code
minimum distribution rules. The annual amount paid each
year is calculated by dividing the Individual Account(s)
Current Value as of December 31 of the prior year,
including any outstanding loan(s), by the number of
payment years remaining.
The life expectancy factor is either the single life or joint
life expectancy, as elected by the Contract Holder, based on
tables in Section 401(a)(9) of the Code or related regulations.
If the joint life expectancy is elected, upon the death of
either the Participant or the spouse, the minimum required dis-
tribution for the Specified Amount payment method will continue
to be calculated in the same manner as described in (b)(1).
Payments upon the Participant's death will continue in the
manner described above, unless the Contract Holder on behalf of
the spouse elects an alternate payment mode. Any mode elected
must provide payments to be made at least as rapidly as those
made prior to the Participant's death.
These calculations may be changed as necessary to comply with
the Code minimum distribution rules. The joint life expectancy
factor can only be elected based on the joint life expectancy
of the Participant and his or her spouse, and such spouse must
be named as the Plan beneficiary of any death benefits under
the Contract while SWO is in effect.
(2) Minimum Initial Current Value: At its discretion, Aetna may
require a minimum initial Current Value for election of this
option. If after election of this option the Current Value is
insufficient to make a scheduled SWO payment, Aetna will
distribute the entire balance of the Individual Account(s).
(3) Date of Distribution: The Contract Holder shall specify the
initial distribution date. The earliest date is the first day
of the calendar year in which the Participant attains age 70
1/2.
SWO payments will be made annually. Subsequent distributions
will be made annually on the 15th of the month the initial
payment was made or such other date Aetna may designate or
allow.
(5) Election and Revocation: SWO may be elected by the Contract
Holder by submitting a completed
18
<PAGE>
and signed election form to Aetna's Home Office. If the
Contract Holder has notified Aetna that the TDA Plan is
subject to Title I of the Employee Retirement Income Security
Act of 1974 as amended, the Contract Holder must also certify
in writing that all the appropriate REA requirements have been
met and that the distribution is in accordance with the terms
of the Plan.
Once elected, this option may be revoked by the Contract Holder
by submitting a written request to Aetna at its Home Office.
Any revocation will apply only to amounts not yet paid. SWO
may be elected only once.
(6) Reservation of Rights: Aetna reserves the right to change the
terms of SWO for future elections and discontinue the
availability of this option after proper notification. Aetna
also reserves the right to allow payments to be made more
frequently than annually.
3.17. SUM PAYABLE AT DEATH (BEFORE ANNUITY PAYMENTS START): The Employee
Account Current Value payable under the terms of this section will be
reduced by the amount of the accrued interest on any outstanding loan.
Aetna will pay any portion of the Indi-vidual Account(s) Current Value to
the indi-vidual and in the manner directed in writing by the Contract
Holder when:
(a) The Participant dies before Annuity payments start; and
(b) The notice of death is received in good order by Aetna.
The sum payable will be the Current Value on the date when the notice is
received in good order. The Contract Holder may choose to apply any sum
under an Annuity Option (see Annuity Provisions), subject to any other
terms and conditions of this Contract, or to have the Current Value paid
in a lump sum.
If the payee of the death proceeds is the Participant's surviving spouse
(as the Participant's designated beneficiary under the Plan), the first
Annuity payment or the lump sum payment may be deferred to a date not
later than when the Participant would have attained age 70 1/2 or such
later date as may be allowed under federal law or regulations. If the
payee is not the surviving spouse, all of the Current Value must either
be applied to an Annuity Option within one year of the Participant's
death or be paid to the payee within 5 years of the Participant's death
(see Part IV).
3.18. SURRENDER VALUE: After deduction of the Maintenance Fee (if any), the
amount payable by Aetna upon the surrender of any portion of an
Individual Account shall be reduced by a Surrender Fee. The Surrender
Fee will be in accordance with the Surrender Fee table in 5.02.
The Fee on a total surrender of an Individual Account will not exceed
8.5% of the actual Purchase Payments made to that Account.
For a partial or full surrender from any Individual Account, Aetna must
receive written direction from the Contract Holder on a form acceptable
to Aetna. If the Contract is subject to ERISA, this direction must
include certification that all of the REA requirements have been
satisfied. Aetna may defer payment of the surrender value until
appropriate Contract Holder certification is received.
3.19. SURRENDER RESTRICTIONS: Limitations apply to full and partial surrenders
of the Restricted Amount from this Contract, as required by Code
Section 403(b)(11). The Restricted Amount is the sum of:
(a) Net Purchase Payments attributable to Participant salary reduction
contributions made on and after January 1, 1989; plus
(b) The net increase, if any, in the Current Value of the Employee
Account after December 31, 1988 attributable to
19
<PAGE>
investment gains and losses and credited interest.
The Restricted Amount may be fully or partially surrendered only if one
or more of the following conditions are met:
(a) The Participant has reached age 59 1/2;
(b) The Participant has separated from service;
(c) The Participant has died;
(d) The Participant has become disabled, within the meaning of Code
Section 72(m)(7); or
(e) The withdrawal is otherwise allowed by federal law, regulations or
rulings.
A full or partial surrender is also allowed if the Participant incurs a
"hardship" as that term is defined in the Code or regulations under Code
Section 403(b). However, the amount available for hardship is limited to
the lesser of the amount necessary to satisfy the need, or the Net
Purchase Payments attributable to Participant salary reduction
contributions made on and after January 1, 1989.
The Contract Holder must certify that one of these conditions has been
met before a surrender request will be considered to be in good order.
The Contract Holder must notify Aetna in writing when a lump sum payment
is to be made or Annuity payments are to commence.
If, pursuant to Revenue Ruling 90-24, amounts are transferred to this
Contract from a Code Section 403(b)(7) custodial account, the December
31, 1988 value from such transferred amount may be distributed upon the
Contract Holder's request. The Contract Holder must certify that one of
the conditions mentioned above has been met or that the Participant has
incurred a hardship. The remaining transferred value from the Employee
Account will be considered a Restricted Amount subject to the Surrender
Restrictions of this subsection.
3.20. TIMING OF DISTRIBUTIONS: The distribution of benefits accrued after
December 31, 1986, must be made in a lump sum or must begin not later
than the April 1 of the calendar year following the calendar year in
which the Participant attains age 70 1/2. However, for a Participant
who attained age 70 1/2 before January 1, 1988, the distribution of such
benefits must be made or must begin not later than the April 1 of the
calendar year following the calendar year in which the Participant
retires.
The above does not apply if the Contract Holder is a governmental entity
or a church. For Participants of such an employer, the distribution of
benefits accrued after December 31, 1986, must be made or must begin not
later than the April 1 of the Calendar year following the calendar year
in which the Participant attains age 70 1/2 or retires, whichever occurs
later.
The required distribution described in either of the above rules must be
made over the life of the Participant (or the joint lives of the
Participant and the beneficiary) or over a period not exceeding the life
expectancy of the Participant (or the joint life expectancies of the
Participant and the Plan beneficiary).
If the Contract Holder does not request com-mencement of benefits as
described above, Aetna will not be responsible for compliance with the
Code Section 401(a)(9) minimum distribution requirements and for any ad-
verse tax consequences that may result.
3.21. PAYMENT OF SURRENDER VALUE: Under certain emergency conditions, Aetna
may defer payment;
(a) For a period of up to 6 months (unless not allowed by state law);
and
(b) As provided by federal law.
Aetna may pay any Fixed Account Surrender Value with interest in equal
payments over a period not to exceed 60 months when the amount held in
the Fixed
20
<PAGE>
Account under this Contract exceeds $250,000. This will apply only if
the sum of the amounts surrendered within the past 12 months exceeds 20%
of such Fixed Account amount.
Interest, as used above, will not be more than two percentage points
below any rate determined prospectively by the Board of Directors for
this class of Contract. In no event will the interest rate be less than
4%.
3.22. REINSTATEMENT: All or a portion of the proceeds of a full surrender of
this Contract may be reinvested within 30 days after the surrender if
allowed by law. Any Main-tenance Fee and Surrender Fee charged at the
time of surrender on the amount being reinvested will be included in the
reinstatement. Any Market Value Adjustment deducted from GA Account
surrenders will not be included in the re-instatement. Amounts will be
reinstated among the Fixed Account, GA Account, and the Fund(s) in the
same proportion as they were at the time of surrender. Any amounts
reinstated to the GA Account will be credited to the current Deposit
Period. The number of Record Units reinstated will be based on the
Record Unit Value(s) next computed after receipt at Aetna's Home Office
of the reinstatement request and the amount to be reinvested.
Any Maintenance Fee which falls due after the surrender and before the
reinstatement will be deducted from the amount reinstated.
Reinstatement is permitted only once.
21
<PAGE>
IV. ANNUITY PROVISIONS
4.01. CHOICES TO BE MADE: The Contract Holder may elect an Annuity Option on
behalf of a Participant by telling Aetna to pay all or any portion of the
Current Value (minus any premium tax) as a premium for an Annuity under
Option 2, 3, or 4 (see 4.07). The present value of the expected payments
to the Annuitant when payments start shall be determined in accordance
with the tables under Code Section 401(a)(9) regulations in order to
comply with the incidental death benefit test. This restriction does not
apply if Option 4(e) is chosen and the second Annuitant is the spouse of
the Annuitant.
Generally, the first Annuity payment must be made no later than the April
1 of the calendar year following the year in which the Participant turns
age 70 1/2 or such later date as may be allowed under federal law or
regulations (see 3.20). For distributions taken in a lump sum, see
Surrender Value (3.17).
For any election of an Annuity Option, the Contract Holder must provide
certification that the REA requirements, as applicable, and Code Section
403(b)(11) withdrawal restrictions have been satisfied.
When an Annuity Option is chosen, Aetna must also be told if payments are
to be made other than monthly and to pay:
(a) A Fixed Annuity using the General Account;
(b) A Variable Annuity using any of the Fund(s) made available by Aetna
for Annuity purposes; or
(c) A combination of (a) and (b).
If a Fixed Annuity is chosen, Aetna will add interest daily at an annual
rate no less than 3.5%. Aetna may add interest daily at any higher rate.
If a Variable Annuity is chosen, an Assumed Annual Net Return Rate of 5%
may be chosen. If not chosen, Aetna will use an Assumed Annual Net
Return Rate of 3.5%.
With the exception of Option 2 on a variable basis, once elected, an
Annuity Option may not be revoked.
4.02. ANNUITY PAYMENTS TO ANNUITANT: In no event may any payments to the
Annuitant under any Annuity Option extend beyond:
(a) The life of the Annuitant;
(b) The lives of the Annuitant and the Plan beneficiary;
(c) A period certain greater than the Annuitant's life expectancy
according to regulations under Code Section 401(a)(9), determined
as of the date payments are to commence; or
(d) A period certain greater than the life expectancies of the Annuitant
and the Plan beneficiary according to regulations under Code
Section 401(a)(9) determined as of the date payments are to begin.
4.03. DEATH OF ANNUITANT: When an Annuitant dies under Options 2, and 3, the
present value of any remaining guaranteed payments will be paid in one
sum to the Plan beneficiary as directed in writing by the Contract
Holder, or upon election by the Annuitant's Plan beneficiary, any
remaining payments will continue to the Plan beneficiary. If no Plan
beneficiary exists, the present value of any remaining guaranteed
payments will be paid in one lump sum to the Contract Holder.
In no event may any payments to the Plan beneficiary under an Annuity
Option extend beyond:
22
<PAGE>
(a) The life of the payee determined as of the date payments are to
commence; or
(b) Any certain period greater than the payee's life expectancy as
determined by regulations under Code Section 401(a)(9) as of the
date payments are to begin.
However, if a Plan beneficiary dies while under Option 1 or while
receiving Annuity payments, the present value of any remaining payments
will be paid in one lump sum to the estate of the Plan beneficiary. The
interest rate used to determine the first payment will be used to
calculate the present value.
4.04. FUND(S) ANNUITY UNITS - SEPARATE ACCOUNT: The number of Fund(s) Annuity
Units is based on the amount of the first Variable Annuity payment which
is equal to:
(a) The portion of the Current Value (minus any premium tax) applied to
pay a Variable Annuity; divided by
(b) 1,000; multiplied by
(c) The payment rate for the Option chosen.
Such amount, or portion, of the Variable Payment will be divided by the
appropriate Fund(s) Annuity Unit Value (see 4.05) on the tenth Valuation
Period before the due date of the first payment to determine the number
of each Fund Annuity Units. The number of each Fund Annuity Units
remains fixed. Each future payment is equal to the sum of the products
of each Fund Annuity Unit Value multiplied by the appropriate number of
Units. The Fund Annuity Unit Value on the tenth Valuation Period prior
to the due date of the payment is used.
4.05. FUND(S) ANNUITY UNIT VALUE - SEPARATE ACCOUNT: For any Valuation Period,
a Fund(s) Annuity Unit Value is equal to:
(a) The Value for the previous Period; multiplied by
(b) The Net Return Factor(s) (see 3.08) for the Period; multiplied by
(c) A factor to reflect the Assumed Annual Net Return Rate.
The factor for 3.5% per year is .9999058; for 5% per year it is .9998663.
The dollar value of the Fund(s) Annuity Unit Values and payments may go
up or down due to investment gain or loss.
If Variable Annuity payments are not to decrease, Aetna must earn a gross
return on the assets of the Separate Account of:
- 4.75% on an annual basis plus an annual return of up to 0.25% needed
to offset the administrative charge set at the time Annuity payments
commence if an Assumed Annual Net Return Rate of 3.5% is chosen; or,
- 6.25% on an annual basis plus an annual return of up to 0.25% needed
to offset the administrative charge set at the time Annuity payments
commence if an Assumed Annual Net Return Rate of 5% is chosen.
Payments shall not be changed due to changes in the mortality or expense
results or administrative charges.
4.06. ANNUITY OPTIONS:
Option 1 - Payments of Interest on Sum Left with Aetna - This Option may
be used only by the Plan beneficiary when the Participant dies before
Aetna has started paying an Annuity. A portion or all of the sum paid
upon death may be held under this Option and will be held in the General
Account of Aetna at interest (see 4.01). The Contract Holder, on behalf
of the Plan beneficiary, may later tell Aetna to:
(a) Pay a portion or all of the sum held by Aetna; or
23
<PAGE>
(b) Apply a portion, or all, of the sum held by Aetna to any Annuity
Option below.
If the Plan beneficiary is the Participant's surviving spouse, the lump-
sum payment may be deferred to a date not later than when the Participant
would have attained age 70 1/2.
If the Plan beneficiary is not a spouse, the Contract Holder must tell
Aetna to pay the full sum within 5 years after the death of the
Participant.
Option 2 - Payments for a Stated Period of Time - An Annuity will be paid
for the num-ber of years chosen. The number of years must be at least 3
and not more than 30.
If payments for this Option are made under a Variable Annuity, the
present value of any remaining payments may be withdrawn at any time. If
a withdrawal is requested within 3 years after the start of payments, it
will be treated as a surrender (see 3.17).
Option 3 - Life Income - An Annuity will be paid for the life of the
Annuitant. If also chosen, Aetna will guarantee payments for 60, 120,
180, or 240 months.
Option 4 - Life Income for Two Payees - An Annuity will be paid during
the lives of the Annuitant and a second Annuitant. At the death of
either, payments will continue to the survivor. When this Option is
chosen, a choice must be made of:
(a) 100% of the payment to continue to the survivor;
(b) 66 2/3% of the payment to continue to the survivor;
(c) 50% of the payment to continue to the survivor; or
(d) Payments for a minimum of 120 months, with 100% of the payment to
continue to the survivor.
(e) 100% of the payment to continue to the survivor if the survivor is
the Annuitant and 50% of the payment to continue to the survivor if
the survivor is the second Annuitant.
Other Options - Aetna may make other options available as allowed by the
laws of the state in which this Contract is delivered.
24
<PAGE>
OPTION 2
PAYMENTS FOR A STATED PERIOD OF TIME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
YEARS YEARS YEARS
OF PAY- AMOUNT OF OF PAY- AMOUNT OF OF PAY- AMOUNT OF
MENTS PAYMENTS MENTS PAYMENTS MENTS PAYMENTS
----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C>
3 $29.19 13 $7.94 22 $5.39
4 22.27 14 7.49 23 5.24
5 18.12 15 7.10 24 5.09
6 15.35 16 6.76 25 4.96
7 13.38 17 6.47 26 4.84
8 11.90 18 6.20 27 4.73
9 10.75 19 5.97 28 4.63
10 9.83 20 5.75 29 4.53
11 9.09 21 5.56 30 4.45
12 8.46
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
YEARS YEARS YEARS
OF PAY- AMOUNT OF OF PAY- AMOUNT OF OF PAY- AMOUNT OF
MENTS PAYMENTS MENTS PAYMENTS MENTS PAYMENTS
----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C>
3 $29.80 13 $8.64 22 $6.17
4 22.89 14 8.20 23 6.02
5 18.74 15 7.82 24 5.88
6 15.99 16 7.49 25 5.76
7 14.02 17 7.20 26 5.65
8 12.56 18 6.94 27 5.54
9 11.42 19 6.71 28 5.45
10 10.51 20 6.51 29 5.36
11 9.77 21 6.33 30 5.28
12 9.16
</TABLE>
25
<PAGE>
OPTION 3
LIFE INCOME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
-------------------------------------------------
<TABLE>
<CAPTION>
AGE OF
ANNUITANT NONE 60 120 180 240
- --------- ---- -- --- --- ---
<S> <C> <C> <C> <C> <C>
50 $4.34 $4.34 $4.31 $4.27 $4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
</TABLE>
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
26
<PAGE>
OPTION 3
LIFE INCOME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
-------------------------------------------------
<TABLE>
<CAPTION>
AGE OF
ANNUITANT NONE 60 120 180 240
- --------- ---- -- --- --- ---
<S> <C> <C> <C> <C> <C>
50 $5.26 $5.25 $5.22 $5.17 $5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 5.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
</TABLE>
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
27
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
100% TO THE SURVIVOR
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
AGE OF SECOND ANNUITANT
-----------------------
<TABLE>
<CAPTION>
AGE
OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.69 $3.75 $3.81 $3.84 $3.87 $3.90 $3.91 $3.92 $3.92
50 3.75 3.89 3.97 4.04 4.09 4.13 4.15 4.17 4.18
55 3.81 3.97 4.16 4.27 4.35 4.42 4.47 4.50 4.51
60 3.84 4.04 4.27 4.51 4.66 4.78 4.86 4.92 4.95
65 3.87 4.09 4.35 4.66 4.99 5.19 5.35 5.46 5.53
70 3.90 4.13 4.42 4.78 5.19 5.67 5.95 6.17 6.31
75 3.91 4.15 4.47 4.86 5.35 5.95 6.64 7.04 7.34
80 3.92 4.17 4.50 4.92 5.46 6.17 7.04 8.04 8.63
85 3.92 4.18 4.51 4.95 5.53 6.31 7.34 8.63 10.05
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
AGE OF SECOND ANNUITANT
-----------------------
AGE
OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $4.63 $4.68 $4.73 $4.77 $4.80 $4.82 $4.84 $4.85 $4.86
50 4.68 4.80 4.88 4.95 5.00 5.04 5.06 5.08 5.10
55 4.73 4.88 5.04 5.15 5.24 5.30 5.35 5.39 5.41
60 4.77 4.95 5.15 5.37 5.52 5.63 5.72 5.79 5.83
65 4.80 5.00 5.24 5.52 5.83 6.04 6.20 6.31 6.39
70 4.82 5.04 5.30 5.63 6.04 6.49 6.77 6.99 7.15
75 4.84 5.06 5.35 5.72 6.20 6.77 7.45 7.86 8.16
80 4.85 5.08 5.39 5.79 6.31 6.99 7.86 8.84 9.43
85 4.86 5.10 5.41 5.83 6.39 7.15 8.16 9.43 10.86
</TABLE>
28
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
66 2/3% TO THE SURVIVOR
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
AGE OF SECOND ANNUITANT
-----------------------
<TABLE>
<CAPTION>
AGE
OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.94 $4.05 $4.18 $4.32 $4.48 $4.66 $4.84 $5.02 $5.19
50 4.05 4.20 4.35 4.51 4.69 4.89 5.09 5.30 5.49
55 4.18 4.35 4.54 4.73 4.95 5.18 5.42 5.65 5.87
60 4.32 4.51 4.73 4.99 5.25 5.53 5.82 6.11 6.37
65 4.48 4.69 4.95 5.25 5.61 5.97 6.33 6.69 7.02
70 4.66 4.89 5.18 5.53 5.97 6.49 6.96 7.43 7.88
75 4.84 5.09 5.42 5.82 6.33 6.96 7.73 8.39 9.02
80 5.02 5.30 5.65 6.11 6.69 7.43 8.39 9.54 10.46
85 5.19 5.49 5.87 6.37 7.02 7.88 9.02 10.46 12.15
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
AGE OF SECOND ANNUITANT
-----------------------
AGE
OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $4.87 $4.99 $5.12 $5.27 $5.44 $5.64 $5.86 $6.09 $6.30
50 4.99 5.12 5.26 5.43 5.63 5.85 6.09 6.33 6.57
55 5.12 5.26 5.44 5.63 5.85 6.11 6.38 6.65 6.92
60 5.27 5.43 5.63 5.87 6.14 6.44 6.75 7.07 7.38
65 5.44 5.63 5.85 6.14 6.49 6.84 7.23 7.62 8.00
70 5.64 5.85 6.11 6.44 6.84 7.35 7.84 8.34 8.83
75 5.86 6.09 6.38 6.75 7.23 7.84 8.60 9.28 9.93
80 6.09 6.33 6.65 7.07 7.62 8.34 9.28 10.42 11.35
85 6.30 6.57 6.92 7.38 8.00 8.83 9.93 11.35 13.04
</TABLE>
29
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
50% TO THE SURVIVOR
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
AGE OF SECOND ANNUITANT
-----------------------
<TABLE>
<CAPTION>
AGE
OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $4.07 $4.22 $4.40 $4.61 $4.87 $5.17 $5.49 $5.84 $6.18
50 4.22 4.37 4.56 4.79 5.06 5.39 5.75 6.13 6.51
55 4.40 4.56 4.76 5.00 5.31 5.66 6.06 6.49 6.91
60 4.61 4.79 5.00 5.27 5.61 6.01 6.46 6.95 7.43
65 4.87 5.06 5.31 5.61 5.99 6.44 6.96 7.54 8.11
70 5.17 5.39 5.66 6.01 6.44 6.99 7.61 8.29 9.00
75 5.49 5.75 6.06 6.46 6.96 7.61 8.43 9.29 10.17
80 5.84 6.13 6.49 6.95 7.54 8.29 9.29 10.54 11.71
85 6.18 6.51 6.91 7.43 8.11 9.00 10.17 11.71 13.57
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
AGE OF SECOND ANNUITANT
-----------------------
AGE
OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $5.01 $5.15 $5.33 $5.56 $5.83 $6.17 $6.55 $6.98 $7.40
50 5.15 5.29 5.48 5.71 6.01 6.36 6.78 7.23 7.68
55 5.33 5.48 5.66 5.91 6.23 6.61 7.05 7.54 8.05
60 5.56 5.71 5.91 6.16 6.51 6.93 7.42 7.96 8.53
65 5.83 6.01 6.23 6.51 6.87 7.34 7.89 8.51 9.16
70 6.17 6.36 6.61 6.93 7.34 7.87 8.51 9.23 10.00
75 6.55 6.78 7.05 7.42 7.89 8.51 9.33 10.20 11.14
80 6.98 7.23 7.54 7.96 8.51 9.23 10.20 11.44 12.64
85 7.40 7.68 8.05 8.53 9.16 10.00 11.14 12.64 14.51
</TABLE>
30
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
100% TO THE SURVIVOR
120 MONTHS MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
AGE OF SECOND ANNUITANT
-----------------------
<TABLE>
<CAPTION>
AGE
OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.69 $3.75 $3.80 $3.84 $3.87 $3.89 $3.91 $3.91 $3.92
50 3.75 3.89 3.97 4.04 4.09 4.13 4.15 4.16 4.17
55 3.80 3.97 4.15 4.26 4.35 4.41 4.46 4.48 4.49
60 3.84 4.04 4.26 4.50 4.65 4.76 4.84 4.89 4.91
65 3.87 4.09 4.35 4.65 4.98 5.17 5.31 5.41 5.46
70 3.89 4.13 4.41 4.76 5.17 5.62 5.87 6.05 6.15
75 3.91 4.15 4.46 4.84 5.31 5.87 6.48 6.79 6.98
80 3.91 4.16 4.48 4.89 5.41 6.05 6.79 7.50 7.83
85 3.92 4.17 4.49 4.91 5.46 6.15 6.98 7.83 8.50
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
AGE OF SECOND ANNUITANT
-----------------------
AGE
OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $4.63 $4.68 $4.73 $4.77 $4.80 $4.82 $4.84 $4.85 $4.85
50 4.68 4.80 4.88 4.94 4.99 5.03 5.06 5.07 5.08
55 4.73 4.88 5.04 5.14 5.23 5.29 5.34 5.37 5.38
60 4.77 4.94 5.14 5.37 5.51 5.62 5.70 5.75 5.78
65 4.80 4.99 5.23 5.51 5.82 6.00 6.15 6.24 6.30
70 4.82 5.03 5.29 5.62 6.00 6.44 6.68 6.86 6.96
75 4.84 5.06 5.34 5.70 6.15 6.68 7.27 7.57 7.76
80 4.85 5.07 5.37 5.75 6.24 6.86 7.57 8.26 8.58
85 4.85 5.08 5.38 5.78 6.30 6.96 7.76 8.58 9.23
</TABLE>
31
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND 1/2 CONTINGENT LIFE INCOME ANNUITY
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
AGE OF SECOND ANNUITANT
-----------------------
<TABLE>
<CAPTION>
AGE
OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.86 $3.89 $3.93 $3.94 $3.96 $3.97 $3.98 $3.98 $3.98
50 4.02 4.10 4.15 4.18 4.21 4.23 4.24 4.25 4.26
55 4.22 4.31 4.42 4.48 4.53 4.57 4.59 4.61 4.61
60 4.43 4.56 4.70 4.84 4.93 4.99 5.04 5.07 5.09
65 4.69 4.84 5.02 5.22 5.42 5.54 5.63 5.69 5.73
70 4.99 5.17 5.39 5.65 5.93 6.23 6.40 6.52 6.60
75 5.33 5.54 5.82 6.14 6.52 6.96 7.40 7.64 7.81
80 5.70 5.96 6.29 6.69 7.17 7.75 8.41 9.08 9.45
85 6.07 6.38 6.75 7.24 7.84 8.59 9.49 10.51 11.50
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
AGE OF SECOND ANNUITANT
-----------------------
AGE
OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $4.80 $4.83 $4.86 $4.88 $4.89 $4.90 $4.91 $4.92 $4.92
50 4.95 5.02 5.06 5.10 5.13 5.15 5.16 5.17 5.18
55 5.14 5.23 5.32 5.38 5.43 5.46 5.49 5.51 5.52
60 5.36 5.47 5.59 5.72 5.80 5.86 5.91 5.95 5.97
65 5.63 5.77 5.93 6.10 6.29 6.41 6.50 6.56 6.60
70 5.96 6.12 6.31 6.54 6.81 7.08 7.25 7.37 7.46
75 6.35 6.54 6.77 7.06 7.42 7.81 8.25 8.49 8.66
80 6.79 7.01 7.30 7.66 8.11 8.65 9.28 9.93 10.29
85 7.26 7.53 7.86 8.29 8.85 9.55 10.41 11.39 12.37
</TABLE>
These Annuity rates are based on mortality from 1983 Table a.
32
<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. MAINTENANCE FEE: The Maintenance Fee will be $15 per Individual Account.
However, for a Separate Individual Account maintained pursuant to a lump-
sum payment, the Maintenance Fee will be $0.
5.02. SURRENDER FEE:
For each surrender from an Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for the
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by the Participant. A Purchase
Payment Cycle is completed when this number and amount of Purchase
Payments have been made. The number of Purchase Payment Cycles completed
may not be greater than the number of whole years since the Individual
Account was established. For each surrender, the Fee will be as follows:
NUMBER OF PURCHASE PAYMENT CYCLES COMPLETED SURRENDER FEE
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
IF PERIOD OF TIME IS SURRENDER FEE
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual Accounts
is $2,500 or less;
33
<PAGE>
(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The Contract
Holder must submit documentation satisfactory to Aetna to confirm
that the Participant is no longer providing services to the
employer.
34
<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. MAINTENANCE FEE: The Maintenance Fee will be $12.50 per Individual
Account. However, for a Separate Individual Account maintained pursuant
to a lump-sum payment, the Maintenance Fee will be $0.
5.02. SURRENDER FEE:
For each surrender from an Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for the
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by the Participant. A Purchase
Payment Cycle is completed when this number and amount of Purchase
Payments have been made. The number of Purchase Payment Cycles completed
may not be greater than the number of whole years since the Individual
Account was established. For each surrender, the Fee will be as follows:
NUMBER OF PURCHASE PAYMENT CYCLES COMPLETED SURRENDER FEE
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
IF PERIOD OF TIME IS SURRENDER FEE
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual Accounts
is $2,500 or less;
33
<PAGE>
(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The Contract
Holder must submit documentation satisfactory to Aetna to confirm
that the Participant is no longer providing services to the
employer.
34
<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. MAINTENANCE FEE: The Maintenance Fee will be $10 per Individual Account.
However, for a Separate Individual Account maintained pursuant to a lump-
sum payment, the Maintenance Fee will be $0.
5.02. SURRENDER FEE:
For each surrender from an Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for the
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by the Participant. A Purchase
Payment Cycle is completed when this number and amount of Purchase
Payments have been made. The number of Purchase Payment Cycles completed
may not be greater than the number of whole years since the Individual
Account was established. For each surrender, the Fee will be as follows:
NUMBER OF PURCHASE PAYMENT CYCLES COMPLETED SURRENDER FEE
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
IF PERIOD OF TIME IS SURRENDER FEE
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual Accounts
is $2,500 or less;
33
<PAGE>
(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The Contract
Holder must submit documentation satisfactory to Aetna to confirm
that the Participant is no longer providing services to the
employer.
34
<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. MAINTENANCE FEE: The Maintenance Fee will be $7.50 per Individual
Account. However, for a Separate Individual Account maintained pursuant
to a lump-sum payment, the Maintenance Fee will be $0.
5.02. SURRENDER FEE:
For each surrender from an Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for the
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by the Participant. A Purchase
Payment Cycle is completed when this number and amount of Purchase
Payments have been made. The number of Purchase Payment Cycles completed
may not be greater than the number of whole years since the Individual
Account was established. For each surrender, the Fee will be as follows:
NUMBER OF PURCHASE PAYMENT CYCLES COMPLETED SURRENDER FEE
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
IF PERIOD OF TIME IS SURRENDER FEE
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual Accounts
is $2,500 or less;
33
<PAGE>
(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The Contract
Holder must submit documentation satisfactory to Aetna to confirm
that the Participant is no longer providing services to the
employer.
34
<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. MAINTENANCE FEE: The Maintenance Fee will be $5 per Individual Account.
However, for a Separate Individual Account maintained pursuant to a lump-
sum payment, the Maintenance Fee will be $0.
5.02. SURRENDER FEE:
For each surrender from an Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for the
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by the Participant. A Purchase
Payment Cycle is completed when this number and amount of Purchase
Payments have been made. The number of Purchase Payment Cycles completed
may not be greater than the number of whole years since the Individual
Account was established. For each surrender, the Fee will be as follows:
NUMBER OF PURCHASE PAYMENT CYCLES COMPLETED SURRENDER FEE
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
IF PERIOD OF TIME IS SURRENDER FEE
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual Accounts
is $2,500 or less;
33
<PAGE>
(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The Contract
Holder must submit documentation satisfactory to Aetna to confirm
that the Participant is no longer providing services to the
employer.
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V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. MAINTENANCE FEE: The Maintenance Fee will be $2.50 per Individual
Account. However, for a Separate Individual Account maintained pursuant
to a lump-sum payment, the Maintenance Fee will be $0.
5.02. SURRENDER FEE:
For each surrender from an Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for the
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by the Participant. A Purchase
Payment Cycle is completed when this number and amount of Purchase
Payments have been made. The number of Purchase Payment Cycles completed
may not be greater than the number of whole years since the Individual
Account was established. For each surrender, the Fee will be as follows:
NUMBER OF PURCHASE PAYMENT CYCLES COMPLETED SURRENDER FEE
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
IF PERIOD OF TIME IS SURRENDER FEE
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual Accounts
is $2,500 or less;
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(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The Contract
Holder must submit documentation satisfactory to Aetna to confirm
that the Participant is no longer providing services to the
employer.
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<PAGE>
[AETNA - LOGO]
AETNA LIFE INSURANCE AND ANNUITY COMPANY
HOME OFFICE: 151 FARMINGTON AVE.
HARTFORD, CONNECTICUT 06156
(203) 273-2131
GROUP VARIABLE, FIXED, OR COMBINATION CONTRACT
NONPARTICIPATING
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN
BASED ON INVESTMENT EXPERIENCE OF SEPARATE ACCOUNT, ARE VARIABLE
AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT
CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MAR-
KET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE
IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES
NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
G-CDA-IA (RP)
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
ENDORSEMENT
The Contract and the Certificate, (as applicable), is hereby endorsed.
The term VALUATION PERIOD under General Definitions is amended to read ad
follows:
The period of time for which a Fund determines its net asset value, usually
from 4:15 p.m. Eastern time each day the New York Stock Exchange is open
until 4:15 p.m. the next such day, or such other day that one or more of
the Funds determines its net asset value.
Endorsed and made a part of the Contact and the Certificate, (as applicable).
/s/ Gary Benanav
PRESIDENT
AETNA LIFE INSURANCE AND ANNUITY COMPANY
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
ENDORSEMENT
This contract is hereby endorsed as follows:
GENERAL DEFINITIONS is ammended to include the following defined terms:
AETNA GET FUND (GET FUND): An open-end registered management investment
company organized as a series fund. Each series of GET Fund constitutes a
separate Fund under this Contract.
ALLOCATION PERIOD: The period of time, usually from one to three months,
during which amounts may be allocated to a series of GET Fund, whether by
Transfer or by Net Purchase Payment(s). Each series of GET Fund will have a
specific Allocation Period.
At its discretion, Aetna may allow additional amounts to be allocated to a
series of GET Fund during the Guarantee Period. The Guarantee established at
the close of the Allocation Period will apply to these amounts.
At its discretion, Aetna may specify a minimum amount per Transfer and per
Net Purchase Payment amount for each series prior to the beginning of the
Alloction Period for that series.
Aetna will specify a minimum amount of assets that a series of the GET Fund
must contain at the close of the Allocation Period; and reserves the right to
terminate a series if it does not meet this minimum standard. If Aetna
elects to terminate the GET Fund and not to start the Guarantee Period, Aetna
will mail each Contract Holder with amount(s) in the series a notice that the
series is being canceled. The cancellation notice will be mailed no later
than 15 calendar days after the Allocation Period ends. The Contract Holder
will have 45 calendar days from the end of the Allocation Period to Transfer
the Current Value of the canceled series of GET Fund to another accumulation
option(s). If no Transfer is made prior to the end of the 45 calendar day
period, the Current Value in the cancelled series of GET Fund will be
transferred to Aetna Variable Encore Fund, a money market fund during the
next Valuation Period.
Aetna will also specify the maximum amount of assets that will be accepted
into a series of the GET Fund; and reserves the right to not allow additional
allocation to a series if it exceeds this maximum standard. If Aetna elects
not to allow additional allocation to the series of GET Fund, Aetna will stop
accepting Net Purchase Payments and Transfers into the series 10 calendar
days after such election. The Allocation Period will continue until the date
the Guarantee Period begins.
GET FUND MATURITY DATE: The date at which the Guaranteed Period for a series
will end and the GET Fund Record Units for that series will be liquidated.
Another accumulation option must then be elected. If no such election is
made by the GET Fund Maturity Date, the portion of the Current Value based on
that GET Fund series will be transferred to the Allocation Period for another
series of GET Fund. If no GET Fund Series is available, 50% of the Current
Value from that Get Fund series will be transferred to Aetna Varaiable Fund,
a growth and income fund. The remaining 50% of the Current Value will be
transferred to Aetna Income Shares, a bond fund. The Transfers will be made
during the next Valuation Period. Such Transfers will not be counted as one
of the free Transfers. The GET Fund Maturity Date will be specified before
the Allocation Period for that series begins.
<PAGE>
GUARANTEE: Aetna guarantees that on a series' GET Fund Maturity Date, the
value of each GET Fund Record Unit then outstanding in that series will not
be less than the value of the Record Unit on the last day of the Allocation
Period. Aetna will transfer any amount necessary from its general account to
the Separate Account in order to bring that Record Unit Value to the
guaranteed level. The Guarantee does not apply to GET Fund Record Unit
Values withdrawn or transferred before the GET Fund Maturity Date.
GUARANTEED PERIOD: The length of time to which the Guarantee applies for a
series, ending on the GET Fund Maturity Date. This period will be specified
before the Allocation Period for a series begins.
The Contract section entitled FUND(S) is amended to add the following sentence:
Unless specifically indicated otherwise in this Contract, all references to
Fund(s) in this Contract shall include each series of GET Fund.
The Contract Section entitled NET RETURN FACTOR(S) - SEPARATE ACCOUNT is hereby
endorsed to add the following as subsection (f):
Minus a daily fee at an annual rate of 0.25% during the Guaranteed Period for
Aetna's guarantee of the GET Fund Record Unit Values. This fee will be
determined prior to the start of any series of GET Fund's Allocation Period.
The Contract section entitled TRANSFER OF CURRENT VALUE FROM THE FUNDS is
amended to include the following paragraph at the end of this provision:
Withdrawals or Transfers from a GET Fund series before the Maturity Date will
be at the then applicable GET Fund Record Unit Value, which may be more or
less than the Record Unit Value guaranteed at the GET Fund Maturity Date.
The Contract section entitled REINSTATEMENT is amended to include the following
paragraph at the end of this provision:
Amounts attributable to GET will be reinstated to the Allocation Period of a
GET series, if available. If a GET series Allocation Period is unavailable,
amounts will be reallocated among other Funds(s), the Fixed Account and the
GA Account, (if applicable), on a prorata basis.
The Contract section entitled CHOICES TO BE MADE is amended to include the
following paragraph at the end of this provision:
Contract values based on any GET Fund series must be transferred to another
accumulation option prior to election of an Annuity Option.
Endorsed and made a part of this Contract on the effective date of the Contract.
/s/ Gary Benanav
PRESIDENT
AETNA LIFE INSURANCE AND ANNUITY COMPANY
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
ENDORSEMENT
The Contract and the Certificate is hereby endorsed as follows.
Add the following to Section I GENERAL DEFINITIONS:
FIXED PLUS ACCOUNT: An accumulation option with a guaranteed minimum
interest rate. Aetna may credit a higher rate which is not guaranteed. No
Surrender Fee applies. However, the portion that may be surrendered or
transferred in a 12 month period is restricted.
Add the following sentence to Section 1.10 entitled FIXED ACCOUNT.
A Surrender Fee may be applied on a full or partial surrender.
Add the following to the third paragraph under Section 2.01 entitled CHANGE OF
CONTRACT:
(h) Guaranteed Interest Rate -- Fixed Plus Account
(i) Maximum transfer fees
Delete and replace the last two sentences of the fifth paragraph under Section
2.01 entitled CHANGE OF CONTRACT as follows:
Aetna also reserves the right to discontinue accepting additional Purchase
Payment(s) for Participants covered under this Contract prior to the
change. Aetna reserves the right to change the provisions regarding the
allocation of contributions or transfers to the Fixed Plus Account without
Contract Holder consent. This Contract may also be changed as deemed
necessary by Aetna to comply with federal or state law without Contract
Holder consent.
Add the following to the second paragraph of Section 3.01 entitled NET PURCHASE
PAYMENT(S):
(d) The Fixed Plus Account.
Delete the fourth paragraph under Section 3.01 entitled NET PURCHASE PAYMENT(S)
and replace it with the following statement.
The Contract Holder or, if permitted by the Contract Holder, the
Participant may change the allocation of future Net Purchase Payment(s) at
any time, without charge.
Add the following to the end of Section 3.01 entitled NET PURCHASE PAYMENT(S):
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Transferred assets are the value of prior contributions into this Plan or
to a similar plan. Transferred assets, less any premium tax, will be
allocated to a Participant's Individual Account as of the date received in
good order by Aetna at its Home Office. Where transferred assets are
anticipated to be at least $500,000, within six months of the first
Purchase Payment to the Contract, Aetna will apply a transfer credit equal
to 2% of transferred assets deposited into the Contract.
The transfer credit amount will be calculated as of the six month
anniversary of the first Purchase Payment made to the Contract, based on
the total amount of transferred assets deposited to and remaining in the
Individual Account on that date. The transfer credit is due on the first
business day of the calendar month after the six month anniversary. It
will be applied to the Individual Account on or before the 11th business
day of that month. The transfer credit amount will be allocated to the
Fixed Plus Account. The amount will include the transfer credit plus any
interest that would have accrued had the transfer credit been deposited on
the first business day of the month.
Delete and replace Section 3.05 entitled GUARANTEED INTEREST RATE -- FIXED
ACCOUNT as follows:
(a) GUARANTEED INTEREST RATE -- FIXED ACCOUNT: On any Purchase Payment(s)
made to the Fixed Account, Aetna will add interest daily at an annual
rate that is no less than 4%. Aetna may add interest daily at any
higher rate determined by its Board of Directors.
(b) GUARANTEED INTEREST RATE -- FIXED PLUS ACCOUNT: On any Net Purchase
Payment(s) made to the Fixed Plus Account, Aetna will add interest
daily at an annual rate that is no less than 3%. Aetna may add
interest daily at a higher rate as determined by its Board of
Directors. Beginning on the tenth anniversary of the Effective Date of
an Individual Account, on and after February 1, 1994, Aetna will
credit amounts held in the Fixed Plus Account with an interest rate
that is .25% higher than the then-declared interest rate for the Fixed
Plus Account for Individual Accounts before the tenth anniversary.
Delete and replace subsection (a) under Section 3.11 entitled CURRENT VALUE as
follows:
(a) Any amounts in the Fixed Account, including Fixed Account interest
added by Aetna; and/or any amount(s) in the Fixed Plus Account
including Fixed Plus Account interest added by Aetna; plus
Delete Section 3.12 entitled TRANSFER OF CURRENT VALUE FROM THE FUNDS OR GA
ACCOUNT and replace as follows.
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<PAGE>
Before an Annuity Option is elected, all or any portion of the Current
Value may be transferred from any Fund or the GA Account:
(a) To any other allowable Fund;
(b) To the Fixed Account; or
(c) To the Fixed Plus Account; or
(d) To Terms of the GA Account available in the current Deposit Period.
Any transfer relating to the GA Account is subject to the transfer
restrictions referenced in the fourth and fifth paragraph of Section
3.04(e).
There is no limit on the number of transfers of Current Value from the
Fund(s) or the GA Account. Aetna guarantees a minimum of 12 free transfers
each year, but reserves the right to charge not more than $10 for
additional transfers. Transfers from the Fund(s) are based on values
determined as of the Valuation Period following receipt of a transfer
request in good order at Aetna's Home Office. This provision does not
include transfers from the GA Account at the Maturity Date. At any time
before the Maturity Date, amounts in the GA Account may be subject to the
Market Value Adjustment provision if they are transferred.
Delete and replace Section 3.13 entitled TRANSFER OF CURRENT VALUE FROM THE
FIXED ACCOUNT as follows:
Each calendar year, 10% of the Current Value held in the Fixed Account may
be transferred to any Fund(s) and/or to the GA Account's then-current
Deposit Period. Such transfer will be without charge and will not be
allowed under an Annuity Option. Transfers will be permitted to the Fixed
Plus Account without regard to these limitations. At its discretion, Aetna
may allow Contract Holders to transfer a larger percentage and/or take
multiple transfers in a calendar year. If Aetna so allows, Aetna reserves
the right to reinstate the transfer limitations without notice.
During each rolling 12-month period, up to 20% of the Current Value held in
the Fixed Plus Account may be transferred to one or more of the Fund(s),
the Fixed Account, and/or to the GA Account's then-current Deposit Period.
The 20% limit is reduced by any partial surrender(s), loan(s) or amount(s)
used to purchase an Annuity during the 12 month period. Aetna reserves the
right to include amounts paid under the ECO and SWO provisions for purposes
of applying this 20% limit. This limit is waived when the balance in the
Fixed Plus Account is $1,000 or less on the date the transfer request is
received in good order at Aetna's Home Office.
Current Value, as used above, is the value when the request is received in
good order at Aetna's Home Office.
Delete and replace Section 3.14 entitled LOAN VALUE with the following
provision.
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During the accumulation period, the Contract Holder may request a loan on
behalf of a Participant with a vested Individual Account Current Value. All
loans will be made in accordance with then-current provisions of the
Internal Revenue Code. If permitted by the Contract Holder, loans may be
taken from amounts attributable to employer contributions under the
Contract. If the Contract is subject to ERISA, the Contract Holder must
provide written certification to Aetna that the REA waiver and spousal
consent requirements are satisfied before the loan will be made. Additional
loan request(s) will not be accepted within 12 months of any prior loan.
The minimum Individual Account Current Value is $2,000. The minimum loan
amount is $1,000. The maximum loan amount is the lesser of:
(a) 50% of the vested Individual Account Current Value, including the
amount of any outstanding loans, reduced by the outstanding loan
balance on the date the loan is made; or
(b) $50,000 reduced by the highest outstanding loan balance for the
preceding 12 months.
When a loan is made, the number of Record Units equal to the loan amount
will be withdrawn from the Current Value. The loan amount will be withdrawn
on a pro rata basis from the Fixed Account, the Fixed Plus Account and from
the Fund(s). Record Units do not participate in the investment experience
of the related investment options from which they were withdrawn.
The loan interest rate is equal to Moody's Corporate Bond Yield Average-
Monthly Average Corporates as published by Moody's Investors Service, Inc.
for the calendar month beginning two months before the date on which the
rate becomes effective. This rate applies for one year. On the anniversary
of the loan's effective date, the rate will be increased or decreased if it
changes by .5% or more. The Individual Account is credited with the amount
of interest being charged less 3%. Quarterly interest is allocated to the
same investment options and in the same proportion as the loan amount that
was withdrawn.
Principal and interest is amortized quarterly over a one to five year term,
or if the loan is taken for the acquisition of a Participant's primary
residence, over a one to 20 year term. However, repayment periods of more
than five years are available only for loan amounts of $2,000 or greater.
Repayment of principal will be allocated to the same investment options and
in the same proportion as the loan amount that was withdrawn.
Any loan payment received that is less than the amount due will be returned
to the Participant.
Any loan payment not paid when due will be in default. A 5% default charge,
if applicable, will be assessed on a portion of the defaulted payment. The
portion
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<PAGE>
subject to this charge is determined by multiplying the defaulted payment
by a percentage determined at the time the loan is taken. This percentage
is calculated by dividing the amount withdrawn from the Fixed Plus Account
which exceeds the 20% limit (reduced by any surrenders, transfers or
amounts used to purchase an Annuity during the 12 months preceding the
loan) by the total loan amount. An automatic partial surrender of an amount
equal to the payment amount in default; plus the default charge, if
applicable; plus any applicable Surrender Fee will be made. Such surrenders
are reported to the Internal Revenue Service as taxable distributions for
that year.
When the Contract Holder on behalf of a Participant requests that the total
Individual Account Current Value be used to purchase Annuity benefits, or
when a death claim is processed, any outstanding loan(s) is canceled.
Interest due, but not yet paid, is deducted. The amount of the canceled
loan(s) is a taxable distribution for that year.
If the Contract Holder on behalf of a Participant requests a full surrender
before a loan is repaid, any outstanding loan is canceled. Interest due but
not paid, any applicable default charge and any applicable Surrender Fee is
deducted. The amount of the canceled loan is a taxable distribution for
that year.
As allowed by law, Aetna may cancel any outstanding loan(s) if the
Individual Account Current Value is less than 25% of the total of all
outstanding loan(s). Any applicable default charge and any applicable
Surrender Fee is deducted. The amount of the canceled loan(s) is a taxable
distribution for that year.
Add the following to subsection (a) under Section 3.15 entitled NOTICE TO THE
CONTRACT HOLDER.
(4) The Fixed Plus Account;
Delete and replace the second and third paragraph under subsection (a)(2) Estate
Conservation Option (ECO) of Section 3.16 entitled DISTRIBUTION OPTIONS with the
following statement.
The life expectancy factor for this purpose is either the single life or
joint life expectancy, as elected by the Contract Holder on behalf of the
Participant, based on tables in Code Section 401(a)(9) or related
regulations. The life expectancy factor shall be recalculated annually, to
the extent permitted by the Code and regulations. The joint life
expectancy factor will be based on the joint life expectancy of the
Participant and his or her beneficiary, and such beneficiary must be named
as the beneficiary of any death benefits under the Plan while ECO is in
effect. Any change in the beneficiary designation under the Plan must be
immediately communicated to Aetna so that subsequent distributions can be
calculated as required by IRS regulations.
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<PAGE>
These calculations may be changed as necessary to comply with the Code
minimum distribution rules. Any mode of payment elected upon the
Participant's death must provide payments to be made at least as rapidly as
those made prior to the Participant's death.
Delete and replace the first paragraph under (b)(1) of Section 3.16 entitled
DISTRIBUTION OPTIONS with the following statement.
Amount of Distribution: The Contract Holder on behalf of the Participant
may elect one of the three payment methods described below.
Delete and replace the first sentence under (b)(1)(a) of Section 3.16 entitled
DISTRIBUTION OPTIONS with the following sentence.
Payments of a designated dollar amount which must be no greater than 20% of
the initial Current Value and shall remain constant unless a higher amount
is required under Code minimum distribution rules.
Delete and replace the third sentence under (b)(1)(a) of Section 3.16 entitled
DISTRIBUTION OPTIONS with the following statement.
The life expectancy factor for this purpose is either the single life or
joint life expectancy, as elected by the Contract Holder on behalf of the
Participant at the time of the election of this option, and with each
subsequent calendar year the factor will be reduced by one. The life
expectancy factors are based on tables in Section 401(a)(9) of the Code or
related regulations. These calculations may be changed as necessary to
comply with the Code minimum distribution rules. If the Participant dies
after the Section 401(a)(9) minimum distribution rules apply, any mode of
payments elected must provide payments to be made at least as rapidly as
those made prior to the Participant's death.
Delete and replace the first sentence under (b)(1)(b) of Section 3.16 entitled
DISTRIBUTION OPTIONS with the following statement.
Payments which are made over a period of time which must be at least five
years, unless otherwise required by Code minimum distribution rules.
Add the following paragraph as (c) under (b)(1) of Section 3.16 entitled
DISTRIBUTION OPTIONS.
Specified Percentage. The specified percentage chosen cannot be greater
than 20% of the Current Value. The Contract Holder on behalf of a
Participant may change the specified percentage elected every six months.
Each annual distribution is determined by multiplying the Individual
Account Current Value by the percentage chosen. The value to be used in
this calculation is the value on the December 31st prior to the
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<PAGE>
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 the Participant attains age 70 1/2.
Delete the last paragraph under (b)(1) of Section 3.16 entitled DISTRIBUTION
OPTIONS.
Delete and replace the second sentence under (b)(3) of Section 3.16 entitled
DISTRIBUTION OPTIONS with the following sentence.
The earliest date is the date on which the Participant attains age 59 1/2
(or age 55 if the Participant has separated from service with the Contract
Holder at or after age 55).
Delete and replace Section 3.18 entitled SURRENDER VALUE with the following
provision.
(a) Surrender Value - Funds(s), Fixed Account, GA Account: After deduction
of the Maintenance Fee (if any), the amount payable by Aetna upon the
surrender of any portion of an Individual Account from the Fund(s),
the Fixed Account and/or the GA Account shall be reduced by a
Surrender Fee. The Surrender Fee will be in accordance with the
Surrender Fee table in 5.02.
The Fee on a total surrender of an Individual Account will not exceed
8.5% of the actual Purchase Payments made to that Account.
(b) Surrender Value -- Fixed Plus Account: No Surrender Fee is deducted
from any portion of the Current Value which is paid from the Fixed
Plus Account. When Aetna receives a full surrender request, no
additional partial surrenders, transfers or loans from the Fixed Plus
Account are permitted during the payout period. If a full surrender is
requested, Aetna will pay any Current Value, including accrued
interest, from the Fixed Plus Account in five payments as follows:
(i) One-fifth of the Current Value on the day the request is
received in good order at Aetna's Home Office, reduced by any
amount from the Fixed Plus Account transferred, surrendered,
taken as a loan or used to purchase Annuity benefits during the
prior 12 months;
(ii) One-fourth of the remaining Current Value 12 months later;
(iii) One-third of the remaining Current Value 12 months later;
(iv) One-half of the remaining Current Value 12 months later; and
(v) The balance of the Current Value 12 months later.
The Fixed Plus Account full surrender payment provision will be waived when
a surrender is:
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(i) Due to the Participant's death before Annuity payments begin and
request for payment is received within six months after the
Participant's date of death;
(ii) Used to purchase Annuity benefits;
(iii) When the amount in the Fixed Plus Account is $3,500 or less and
no amount has been surrendered, transferred, taken as a loan or
used to purchase Annuity benefits during the prior 12 months.
Any full surrender from the Fixed Plus Account may be canceled at any
time before the end of the payment period.
During each rolling 12-month period, up to 20% of the Current Value in
the Fixed Plus Account may be withdrawn as a partial surrender. This
20% limit is reduced by any amount(s) transferred, taken as a loan or
used to purchase an Annuity during the 12 month period. The 20% limit
applicable to partial surrenders from the Fixed Plus Account will be
waived when the partial surrender is due to one of the conditions set
forth in (i) or (ii) of the full surrender payment provision above.
The waiver will apply provided the partial surrender is taken pro-rata
from the Fixed Plus Account, the GA Account, the Fixed Account and the
Fund(s) . The partial surrender waiver due to death may only be
exercised once. Any partial surrender request received after six
months of a Participant's date of death will be subject to the terms
and conditions of the Fixed Plus Account surrender payment provision.
Aetna reserves the right to include amounts paid under the ECO and SWO
provisions for purposes of applying the 20% limit. However, the SWO
provision is not available if the Contract Holder on behalf of the
Participant requested a Fixed Plus Account transfer or surrender
within the current 12 month period.
For a partial or full surrender from any Individual Account, Aetna must
receive written direction from the Contract Holder on a form acceptable to
Aetna. If the Contract is subject to ERISA, this direction must include
certification that all of the REA waiver and spousal consent requirements
have been satisfied. Aetna may defer payment of the surrender value until
appropriate Contract Holder certification is received.
Delete and replace Section 3.22 entitled REINSTATEMENT with the following
provision.
If allowed by law, the amount of all or a portion of the proceeds of a full
surrender of this Contract may be reinvested within 30 days after the
surrender. Any Maintenance or Surrender Fees deducted at the time of
surrender on the amount being reinvested will be included in the
reinstatement. Any Market Value Adjustment deducted from GA Account
surrenders, however, will not be included in the reinstatement. Amounts
will be reinstated among the Fund(s) for the Separate Account, the Fixed
Account, the Fixed Plus Account, and/or the GA Account, as applicable, in
the same proportion as they were at the time of the surrender. Any amounts
reinstated to the GA Account will be credited to Terms available during the
then-current Deposit Period. The number of Record Units reinstated will be
based on the Record Unit Value(s) next computed
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after receipt in good order at Aetna's Home Office of the reinstatement
request and the amount to be reinvested.
Any Maintenance Fee which falls due after the surrender and before the
reinstatement will be deducted from the amount reinvested.
Reinstatement is permitted only once.
Delete and replace the fifth paragraph under Section 4.01 entitled CHOICES TO BE
MADE with the following statement.
The assumed interest rate for a Fixed Annuity and the interest rate under
Annuity Option 1 will be no less than 3.5%. Aetna may add interest daily
under Annuity Option 1 at any higher rate as determined by its Board of
Directors.
Delete and replace subsection Option 2 under Section 4.06 entitled ANNUITY
OPTIONS as follows:
Option 2 -- Payments for a Stated Period of Time -- An Annuity will be
paid for a stated number of years. The number of years that may be
chosen will be determined in part by the investment options in which
the Individual Account Current Value was held prior to the election of
the Annuity Option as follows:
For any amount held in the GA Account, one or more of the Fund(s) or
the Fixed Account, the number of years chosen must be at least three
and not more than 30 and the Annuity may be a Fixed or Variable
Annuity.
For any amount held in the Fixed Plus Account, the number of years
chosen must be at least five and not more than 30 and the Annuity must
be a Fixed Annuity.
Delete and replace the last paragraph under Section 5.02 entitled SURRENDER FEE
as follows:
No Surrender Fee is deducted from any portion of an Individual Account
which is paid from the Fixed Account, the GA Account or the Fund(s):
(a) Due to the Participant's death before Annuity payments begin;
(b) Used to purchase Annuity benefits;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered, except in the case of lump-sum Purchase Payment(s), after
9 years;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) Due to the election of the Estate Conservation Option (ECO) or the
Systematic Withdrawal Option (SWO);
9
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(f) In an amount equal to or less than 10% of the Individual Account
Current Value, as part of the first partial surrender request in a
calendar year to a Participant who is at least age 59 1/2 and less
than 70 1/2. The Individual Account Current Value is calculated as of
the date the partial surrender request is received in good order at
Aetna's Home Office. Any outstanding loans from the Individual Account
are excluded when calculating the Individual Account Current Value.
This provision does not apply to partial surrenders due to loan
defaults made from the Individual Account and does not apply to full
surrender requests. This provision may not be exercised if SWO is
elected;
(g) When the Individual Account Current Value is $3,500 or less and no
amount has been surrendered, taken as a loan or used to purchase
Annuity benefits during the prior 12 months;
(h) To relieve a Participant's "financial hardship," as may be allowed for
annuity contracts under Section 403(b) of the Internal Revenue Code or
applicable Internal Revenue Service rules or regulations; or
(i) On account of a Participant's separation from service. The Contract
Holder must submit documentation satisfactory to Aetna to confirm that
the Participant is no longer providing services to the employer.
Endorsed and made a part of the Contract and the Certificate on the date this
endorsement is approved by the State Insurance Department and accepted by the
Contract Holder, or the effective date of the Contract and/or the Certificate,
whichever is later.
/s/ Dan Kearney
[SPECIMEN - STAMP]
PRESIDENT
AETNA LIFE INSURANCE AND ANNUITY COMPANY
10
EFP94RP
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
ENDORSEMENT
The Contract and the Certificate is hereby endorsed as follows.
Add the following to Section I GENERAL DEFINITIONS:
Fixed Plus Account: An accumulation option with a guaranteed minimum
interest rate. Aetna may credit a higher rate which is not guaranteed. No
Surrender Fee applies. However, the portion that may be surrendered in a
12 month period is restricted.
Add the following sentence to Section 1.10 entitled FIXED ACCOUNT.
A Surrender Fee may be applied on a full or partial surrender.
Add the following to the third paragraph under Section 2.01 entitled CHANGE OF
CONTRACT:
(h) Guaranteed Interest Rate -- Fixed Plus Account
(i) Maximum transfer fees
Delete and replace the last two sentences of the fifth paragraph under Section
2.01 entitled CHANGE OF CONTRACT as follows:
Aetna also reserves the right to discontinue accepting additional Purchase
Payment(s) for Participants covered under this Contract prior to the
change. This Contract may also be changed as deemed necessary by Aetna to
comply with federal or state law without Contract Holder consent.
Add the following to the second paragraph of Section 3.01 entitled NET PURCHASE
PAYMENT(S):
(d) The Fixed Plus Account.
Delete the fourth paragraph under Section 3.01 entitled NET PURCHASE PAYMENT(S)
and replace it with the following statement.
Participants may change the allocation of future Net Purchase Payment(s) at
any time, without charge.
Delete and replace Section 3.05 entitled GUARANTEED INTEREST RATE -- FIXED
ACCOUNT as follows:
(a) GUARANTEED INTEREST RATE -- FIXED ACCOUNT: On any Purchase Payment(s)
made to the Fixed Account, Aetna will add interest daily at an annual
rate that is no less than 4%. Aetna may add interest daily at any
higher rate determined by its Board of Directors.
(b) GUARANTEED INTEREST RATE -- FIXED PLUS ACCOUNT: On any Net Purchase
Payment(s) made to the Fixed Plus Account, Aetna will add interest
daily at an annual rate that is no less than 3%. Aetna may add
interest daily at a higher rate as determined by its Board of
Directors. Beginning on the tenth anniversary of the effective date
of an Individual Account, on and
<PAGE>
after February 1, 1994, Aetna will credit amounts held in the Fixed
Plus Account with an interest rate that is .25% higher than the then-
declared interest rate for the Fixed Plus Account for Individual
Accounts before the tenth anniversary.
Delete and replace subsection (a) under Section 3.11 entitled CURRENT VALUE as
follows:
(a) Any amounts in the Fixed Account, including Fixed Account interest
added by Aetna; and/or amount(s) in the Fixed Plus Account including
Fixed Plus Account interest added by Aetna; plus
Delete Section 3.12 entitled TRANSFER OF CURRENT VALUE FROM THE FUNDS OR GA
ACCOUNT and replace as follows.
Before an Annuity Option is elected, all or any portion of the Current
Value may be transferred from any Fund or the GA Account:
(a) To any other allowable Fund;
(b) To the Fixed Account; or
(c) To the Fixed Plus Account; or
(d) To Terms of the GA Account available in the current Deposit Period.
Any transfer relating to the GA Account is subject to the transfer
restrictions referenced in the fourth and fifth paragraph of Section
3.04(e).
There is no limit on the number of transfers of Current Value from the
Fund(s) or the GA Account. Aetna guarantees a minimum of 12 free transfers
each year, but reserves the right to charge not more than $10 for
additional transfers. Transfers from the Fund(s) are based on values
determined as of the Valuation Period following receipt of a transfer
request in good order at Aetna's Home Office. This provision does not
include transfers from the GA Account at the Maturity Date. At any other
time before the Maturity Date, amounts in the GA Account may be subject to
the Surrender Fee and Market Value Adjustment provisions if they are
transferred.
Delete and replace Section 3.13 entitled TRANSFER OF CURRENT VALUE FROM THE
FIXED ACCOUNT as follows:
Each calendar year, 10% of the Current Value held in the Fixed Account may
be transferred to any Fund(s) and/or to the GA Account's then-current
Deposit Period. Such transfer will be without charge and will not be
allowed under an Annuity Option. Aetna may, on a temporary basis, allow
any larger percent to be transferred.
During each rolling 12-month period, up to 20% of the Current Value held in
the Fixed Plus Account may be transferred to one or more of the Fund(s),
the Fixed Account, or to the GA Account's then-current Deposit Period. The
20% limit is reduced by any partial surrender(s), loan(s) or amount(s) used
to purchase an Annuity during the 12 month period.
Current Value, as used above, is the value when the request is received in
good order at Aetna's Home Office.
2
<PAGE>
Delete and replace Section 3.14 entitled LOAN VALUE with the following
provision.
During the accumulation period, the Contract Holder may request a loan on
behalf of a Participant with a vested Individual Account Current Value.
All loans will be made in accordance with then-current provisions of the
Internal Revenue Code. If the Contract is subject to ERISA, the Contract
Holder must provide written certification to Aetna that the REA
requirements are satisfied before the loan will be made. Additional loan
request(s) will not be accepted within 12 months of any prior loan.
The minimum Individual Account Current Value is $2,000. The minimum loan
amount is $1,000. The maximum loan amount is the lesser of:
(a) 50% of the vested Individual Account Current Value, including the
amount of any outstanding loans, reduced by the outstanding loan
balance on the date the loan is made; or
(b) $50,000 reduced by the highest outstanding loan balance for the
preceding 12 months.
When a loan is made, the number of accumulation units equal to the loan
amount will be withdrawn from the Current Value. The loan amount will be
withdrawn on a pro rata basis from the Fixed Account, the Fixed Plus
Account and from the Fund(s). Accumulation units do not participate in the
investment experience of the related investment options from which they
were withdrawn.
The loan interest rate is equal to Moody's Corporate Bond Yield Average-
Monthly Average Corporates as published by Moody's Investors Service, Inc.
for the calendar month beginning two months before the date on which the
rate becomes effective. This rate applies for one year. On the
anniversary of the loan's effective date, the rate will be increased or
decreased if it changes by .5% or more. The Individual Account is credited
with the amount of interest being charged less 3%. Quarterly interest is
allocated to the same investment options and in the same proportion as the
loan amount was withdrawn.
Principal and interest is amortized quarterly over a one to five year term,
or if the loan is taken for the acquisition of a Participant's primary
residence, over a one to 20 year term. Repayment of principal will be
allocated to the same investment options and in the same proportion as the
loan amount was withdrawn.
Any loan payment received that is less than the amount due will be returned
to the Participant.
Any loan payment not paid when due will be in default. A 5% default charge,
if applicable, will be assessed on a portion of the defaulted payment. The
portion subject to this charge is determined by multiplying the defaulted
payment by a percentage determined at the time the loan is taken. This
percentage is calculated by dividing the amount withdrawn from the Fixed
Plus Account which exceeds the 20% limit (reduced by any surrenders,
transfers or amounts used to purchase an Annuity during the 12 months
preceding the loan) by the total loan amount. An automatic partial
surrender of an amount equal to the payment amount in default; plus the
default charge, if applicable; plus any applicable Surrender Fee will be
made. Such surrenders are reported to the Internal Revenue Service as
taxable distributions for that year.
3
<PAGE>
When the Contract Holder on behalf of a Participant requests that the total
Individual Account Current Value be used to purchase Annuity benefits, or
when a death claim is processed, any outstanding loan(s) is canceled.
Interest due, but not yet paid, is deducted. The amount of the canceled
loan(s) is a taxable distribution for that year.
If the Contract Holder on behalf of a Participant requests a full surrender
before a loan is repaid, any outstanding loan is canceled. Interest due
but not paid, any applicable default charge and any applicable Surrender
Fee is deducted. The amount of the canceled loan is a taxable distribution
for that year.
As allowed by law, Aetna may cancel any outstanding loan(s) if the
Individual Account Current Value is less than 25% of the total of all
outstanding loan(s). Any applicable default charge and any applicable
Surrender Fee is deducted. The amount of the canceled loan(s) is a taxable
distribution for that year.
Add the following to subsection (a) under Section 3.15 entitled NOTICE TO THE
CONTRACT HOLDER.
(4) The Fixed Plus Account;
Delete and replace the second and third paragraph under subsection (a)(2) Estate
Conservation Option (ECO) of Section 3.16 entitled DISTRIBUTION OPTIONS with the
following statement.
The life expectancy factor for this purpose is either the single life or
joint life expectancy, as elected by the Contract Holder on behalf of the
Participant at the time of the election of this option. The life
expectancy factor shall be recalculated annually. The life expectancy
factors are based on tables in Section 401(a)(9) of the Code or related
regulations. These calculations may be changed as necessary to comply with
the Code minimum distribution rules. Any mode of payment elected upon the
Participant's death must provide payments to be made at least as rapidly as
those made prior to the Participant's death.
Delete and replace the first paragraph under (b)(1)(a) of Section 3.16 entitled
DISTRIBUTION OPTIONS with the following sentence.
Amount of Distribution: The Contract Holder on behalf of the Participant
may elect one of the three payment methods described below.
Delete and replace the first sentence under (b)(1)(a) of Section 3.16 entitled
DISTRIBUTION OPTIONS with the following sentence.
Payments of a designated dollar amount which must be no greater than 20% of
the initial Current Value and shall remain constant unless a higher amoung
is required under Code minimum distribution rules.
Delete and replace the third sentence under (b)(1)(a) of Section 3.16 entitled
DISTRIBUTION OPTIONS with the following sentence.
The life expectancy factor for this purpose is either the single life or
joint life expectancy, as elected by the Contract Holder on behalf of the
Participant at the time of the election of this option, and with each
subsequent calendar year the factor will be reduced by one. The life
4
<PAGE>
expectancy factors are based on tables in Section 401(a)(9) of the Code or
related regulations. These calculations may be changed as necessary to
comply with the Code minimum distribution rules. If the Participant dies
after the Section 401(a)(9) minimum distribution rules apply, any mode of
payments elected must provide payments to be made at least as rapidly as
those made prior to the Participant's death.
Add the following paragraph as (c) under (b)(1) of Section 3.16 entitled
Distribution Options.
Specified Percentage. The specified percentage chosen cannot be greater
than 10% of the Current Value. The Contract Holder on behalf of a
Participant may change the specified percentage elected every six months.
Each annual distribution is determined by multiplying the Individual
Account Current 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 the Participant attains age 70 1/2.
Delete the last paragraph under (b)(1) of Section 3.16 entitled Distribution
Options.
Delete and replace the second sentence under (b)(3) of Section 3.16 entitled
Distribution Options with the following sentence.
The earliest date is the date on which the Participant attains age 59 1/2
(or age 55 if the Participant has separated from service with the Contract
Holder at or after age 55).
Delete and replace Section 3.18 entitled Surrender Value with the following
provision.
(a) Surrender Value - Funds(s), Fixed Account, GA Account: After
deduction of the Maintenance Fee (if any), the amount payable by Aetna
upon the surrender of any portion of an Individual Account from the
Fund(s), the Fixed Account and/or the GA Account shall be reduced by a
Surrender Fee. The Surrender Fee will be in accordance with the
Surrender Fee table in 5.02.
The Fee on a total surrender of an Individual Account will not exceed
8.5% of the actual Purchase Payments made to that Account.
(b) Surrender Value -- Fixed Plus Account: No Surrender Fee is deducted
from any portion of the Current Value which is paid from the Fixed
Plus Account. When Aetna receives a full surrender request, no
additional partial surrenders, transfers or loans from the Fixed Plus
Account are permitted during the payout period. If a full surrender
is requested, Aetna will pay any Current Value, including accrued
interest, from the Fixed Plus Account in five payments as follows:
(i) One-fifth of the Current Value on the day the request is
received in good order at Aetna's Home Office, reduced by any
amount from the Fixed Plus Account transferred, surrendered,
taken as a loan or used to purchase Annuity benefits during the
prior 12 months;
(ii) One-fourth of the remaining Current Value 12 months later;
(iii) One-third of the remaining Current Value 12 months later;
5
<PAGE>
(iv) One Half of the remaining Current Valu 12 months later; and
(v) The balance of the Current Value 12 months later.
The Fixed Plus Account full surrender payment provision will be waived
when a surrender is:
(i) Due to the Participant's death before Annuity payments begin;
(ii) Used to purchase Annuity benefits;
(iii) When the amount in the Fixed Plus Account is $3,500 or less and
no amount has been surrendered, transferred, taken as a loan or
used to purchase Annuity benfits during the prior 12 months.
Any full surrender from the Fixed Plus Account may be canceled at any
time before the end of the payment period.
During each rolling 12-month period, up to 20% of the Current Value in
the Fixed Plus Account may be withdrawn as a partial surrender. This
20% limit is reduced by any amount(s) transferred, taken as a loan or
used to purchase an Annuity during the 12 month period.
For a partial or full surrender from any Individual Account, Aetna must
receive written direction from the Contract Holder on a form acceptable to
Aetna. If the Contract is subject to ERISA, this direction must include
certification that all of the REA requirements have been satisfied. Aetna
may defer payment of the surrender value until appropriate Contract Holder
certification is received.
Delete and replace Section 3.22 entitled Reinstatement with the following
provision.
If allowed by law, the amount of all or a portion of the proceeds of a
full surrender of this Contract may be reinvested within 30 days after
the surrender. Any Maintenance or Surrender Fees deducted at the time
of surrender on the amount being reinvested will be included in the
reinstatement. Any Market Value Adjustment deducted from GA Account
surrenders, however, will not be included in the reinstatement. Amounts
will be reinstated among the Fund(s) in the Spearate Account, the Fixed
Account, the Fixed Plus Account, and/or the GA Account, as applicable,
in the same proportion as they were at the time of the surrender. Any
amounts reinstated to the GA Account will be credited to Terms available
during the then-current Deposit Period. The number of Record Units
reinstated will be based on the Record Unit Value(s) next computed after
receipt in good order at Aetna's Home Office of the reinstatement
request and the amount to be reinvested.
Any Maintenance Fee which falls due after the surrender and before the
reinstatement will be deducted from the amount reinvested.
Reinstatement is permitted only once.
Delete and replace the fifth paragraph under Section 4.01 entitled Choices to be
Made with the following statement.
6
<PAGE>
The assumed interest rate for a Fixed Annuity and the interest rate under
Annuity Option 1 will be no less than 3.5%. Aetna may add interest daily
under Annuity Option 1 at any higher rate as determined by its Board of
Directors.
Delete and replace subsection Option 2 under Section 4.06 entitled Annuity
Options as follows:
Option 2 -- Payments for a Stated Period of Time -- An Annuity will be
paid for a stated number of years. The number of years that may be
chosen will be determined in part by the investment options in which
the Individual Account Current Value was held prior to the election of
the Annuity Option as follows:
For any amount held in the GA Account, one or more of the Fund(s) or
the Fixed Account, the number of years chosen must be at least three
and not more than 30 and the Annuity may be a Fixed or Variable
Annuity.
For any amount held in the Fixed Plus Account, the number of years
chosen must be at least six and not more than 30 and the Annuity must
be a Fixed Annuity.
Delete and replace the last paragraph under Section 5.02 entitled Surrender Fee
as follows:
No Surrender Fee is deducted from any portion of an Individual Account
which is paid from the Fixed Account, the GA Account or the Fund(s):
(a) Due to the Participant's death before Annuity payments begin;
(b) Used to purchase Annuity benefits;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered, except in the case of lumpsum Purchase Payment(s), after
9 years;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) Due to the election of the Estate Conservation Option (ECO) or the
Systematic Withdrawal Option (SWO);
(f) In an amount equal to or less than 10% of the Individual Account
Current Value, as part of the first partial surrender request in a
calendar year to a Participant who is at least age 59 1/2 and less
than 70 1/2. The Individual Account Current Balue is calculated as of
the date the partial surrender request is received in good order at
Aetna's Home Office. Any outstanding loans from the Individual
Account are excluded when calculating the Individual Account Current
Value. This provision does not apply to partial surrenders due to
loan defaults made from the Individual Account and does not apply to
full surrender requests. This provision may not be exercised if SWO
is elected;
(g) When the Individual Account Current Value is $3,500 or less and no
amount has been surrendered, transferred, taken as a loan or used to
purchase Annuity benefits during the prior 12 months. If there is
more than one Individual Account under the Contract for a Participant,
then this provision will only apply when the total in all of the
Participant's Individual Accounts is $3,500 or less;
(h) To relieve a Participant's "financial hardship", as may be allowed for
annuity contracts under Section 403(b) of the Internal Revenue Code or
other appropriate Internal Revenue service sources; or
7
<PAGE>
(i) On account of a Participant's separation from service. The Contract
Holder must submit documentation satisfactory to Aetna to confirm that
the Participant is no longer providing services to the employer.
Endorsed and made a part of the Contract and the Certificate effective
January 15, 1994.
/s/ Gary Benanav
PRESIDENT
AETNA LIFE INSURANCE AND ANNUITY COMPANY
EFP-1C(RP)
8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
ENDORSEMENT
The Contract and the Certificate are hereby endorsed as follows.
Add the following statement to the end of Section 3.01 entitled NET
PURCHASE PAYMENT(S):
Transferred Assets are the value of prior contributions into this Plan
or to a similar plan. Trnasferred Assets, less any premium tax, will
be allocated to a Participant's Individual Account as of the date
received in good order by Aetna at its Home Office.
Aetna will apply a transfer credit equal to 0.50% of Transferred
Assets allocated to an Individual Account within six months of the
first Purchase Payment to the Contract. The transfer credit is due on
the first business day of the calendar month after the six month
anniversary. It will be applied to the Individual Account on or
before the 11th business day of that month. The transfer credit
amount will be allocated to the Fixed or Fixed Plus Account, as
applicable. The amount will include the transfer credit plus any
interest that would have accrued had the transfer credit been
deposited on the first business day of the month.
Endorsed and made a part of the Contract on the effective date of the Contract.
Endorsed and made a part of the Certificate on the effective date of the
Certificate.
/s/ Dan Kearney
PRESIDENT
AETNA LIFE INSURANCE AND ANNUITY COMPANY
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
HOME OFFICE: 151 FARMINGTON AVE.
HARTFORD, CONNECTICUT 06156
(203) 273-2131
Aetna Life Insurance and Annuity Company, herein called Aetna, agrees
to pay the benefits stated in this Contract.
THE VARIABLE FEATURES OF THIS CONTRACT ARE DESCRIBED IN PARTS III AND IV.
RIGHT TO CANCEL
The Contract Holder may cancel this Contract within 10 days of receiving it by
returning this Contract along with a written notice to Aetna at the above
address or to the agent from whom it was purchased. Within 7 days after it
receives the notice of cancellation and this Contract at its Home Office, Aetna
will return the entire consideration paid plus any increase or minus any
decrease in the current value of any funds allocated to the Separate Account C.
This page, the following pages, and the application make up the entire Contract.
Signed at the Home Office on the Effective Date.
/s/ George N. Gingold /s/ Edmund F. Kelly
SECRETARY PRESIDENT
GROUP VARIABLE, FIXED, OR COMBINATION ANNUITY CONTRACT
NONPARTICIPATING
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN
BASED ON INVESTMENT EXPERIENCE OF SEPARATE ACCOUNT C, ARE VARIABLE
AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT
CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MAR-
KET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR DECREASE
IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES
NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
G-CDA-IA (RPM/XC)
<PAGE>
TABLE OF CONTENTS
I. GENERAL DEFINITIONS
PAGE
1.01 Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.02 Fixed Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.03 Variable Annuity. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.04 Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.05 Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.06 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.07 Purchase Payment(s) . . . . . . . . . . . . . . . . . . . . . . . . 5
1.08 General Account . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.09 Separate Account. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10 Fixed Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.11 Fund(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.12 Guaranteed Accumulation Account (GA Account). . . . . . . . . . . . 5
1.13 Nonunitized Separate Account. . . . . . . . . . . . . . . . . . . . 6
1.14 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.15 Matured Term Value. . . . . . . . . . . . . . . . . . . . . . . . . 6
1.16 Valuation Period. . . . . . . . . . . . . . . . . . . . . . . . . . 6
II. GENERAL PROVISIONS
2.01 Change of Contract. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.02 Change of Fund(s) . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.03 Nonparticipating Contract . . . . . . . . . . . . . . . . . . . . . 7
2.04 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.05 State Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.06 Control of Contract . . . . . . . . . . . . . . . . . . . . . . . . 8
2.07 Designation of Beneficiary. . . . . . . . . . . . . . . . . . . . . 8
2.08 Misstatements and Adjustments . . . . . . . . . . . . . . . . . . . 8
2.09 Incontestability. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.10 Grace Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.11 Individual Certificates . . . . . . . . . . . . . . . . . . . . . . 9
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
3.01 Net Purchase Payment(s) . . . . . . . . . . . . . . . . . . . . . . 10
3.02 Individual Accounts . . . . . . . . . . . . . . . . . . . . . . . . 10
3.03 Limitation on Contributions . . . . . . . . . . . . . . . . . . . . 10
3.04 Guaranteed Accumulation Account . . . . . . . . . . . . . . . . . . 10
3.05 Guaranteed Interest Rate - Fixed Account. . . . . . . . . . . . . . 14
3.06 Experience Credits. . . . . . . . . . . . . . . . . . . . . . . . . 14
3.07 Maintenance Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.08 Fund Record Units - Separate Accounts . . . . . . . . . . . . . . . 14
3.09 Net Return Factor(s) - Separate Accounts. . . . . . . . . . . . . . 14
3.10 Fund Record Unit Value - Separate Accounts. . . . . . . . . . . . . 14
3.11 Current Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.12 Transfer of Current Value from the Funds to GA Account. . . . . . . 15
3.13 Transfer of Current Value from the Fixed Account. . . . . . . . . . 15
3
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3.14 Loan Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.15 Notice to the Contract Holders. . . . . . . . . . . . . . . . . . . 17
3.16 Distribution Options. . . . . . . . . . . . . . . . . . . . . . . . 17
3.17 Sum Payable at Death (Before Annuity Payments Start). . . . . . . . 20
3.18 Surrender Value . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.19 Surrender Restrictions. . . . . . . . . . . . . . . . . . . . . . . 21
3.20 Timing of Distributions . . . . . . . . . . . . . . . . . . . . . . 21
3.21 Payment of Surrender Value. . . . . . . . . . . . . . . . . . . . . 22
3.22 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
IV. ANNUITY PROVISIONS
4.01 Choices to be Made. . . . . . . . . . . . . . . . . . . . . . . . . 23
4.02 Annuity Payments to Annuitant . . . . . . . . . . . . . . . . . . . 23
4.03 Death of Annuitant. . . . . . . . . . . . . . . . . . . . . . . . . 23
4.04 Fund(s) Annuity Units - Separate Account. . . . . . . . . . . . . . 24
4.05 Fund(s) Annuity Unit Value - Separate Account C . . . . . . . . . . 24
4.06 Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . 24
V. FEE SCHEDULE
5.01 Maintenance Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.02 Surrender Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4
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I. GENERAL DEFINITIONS
1.01. ANNUITY: Payment of an income:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.02. FIXED ANNUITY: An Annuity with payments which do not vary in amount.
1.03. VARIABLE ANNUITY: An Annuity with payments which vary with the net
investment results of Separate Account C.
1.04. PLAN: The Plan named on the Specifications page. The Plan is not a part
of the Contract. Aetna is not bound by the terms of the Plan.
1.05. ANNUITANT: A person on whose life an Annuity has been effected under
this Contract.
1.06. PARTICIPANT: A person who participates in the Plan named on the
Specifications page of this Contract.
1.07. PURCHASE PAYMENT(S): Payments made to Aetna.
1.08. GENERAL ACCOUNT: The Account holding the assets of Aetna, other than
those assets held in Separate Account or the Nonunitized Separate Account.
1.09. SEPARATE ACCOUNT C: Account C buys and holds shares of the Fund(s).
Income, gains or losses, realized or unrealized are credited or charged to
this account without regard to other income, gains or losses of Aetna.
Aetna owns the assets held in Separate Account C and is not a trustee as
to such amounts. This account generally is not guaranteed and is held at
market value. The assets of this account, to the extent of reserves and
other contract liabilities of Account C, shall not be charged with other
Aetna liabilities.
1.10. FIXED ACCOUNT: An accumulation option with a guaranteed minimum interest
rate. Aetna may credit a higher rate which is not guaranteed.
1.11. FUND(S): The open-end registered management investment companies (mutual
funds) made available by Aetna under this Contract.
These Fund(s) currently are:
- Aetna Variable Fund, a conservative common stock fund;
- Aetna Income Shares, a bond fund;
- Aetna Variable Encore Fund, a money market fund; and
- Aetna Investment Advisers Fund, Inc., a managed fund.
- Franklin Government Securities Trust, a government bond fund;
- Neuberger & Berman Advisers Management Trust, (Growth Portfolio), a
growth fund;
- Lexington Natural Resources Trust, a natural resources fund;
- Calvert Socially Responsible Series, a socially responsible fund; or
- T. Rowe Price International Equity Fund, an international common
stock fund.
Additional information regarding these Funds is available in each Fund
prospectus.
1.12. GUARANTEED ACCUMULATION ACCOUNT: An accumulation option which guarantees
a stipulated rate of interest for a specified period of time.
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1.13. NONUNITIZED SEPARATE ACCOUNT: An Account set up by Aetna under Title 38,
Section 38-154a, of the Connecticut General Statutes which is used to hold
assets for GA Account Terms greater than three years. The Contract Holder
does not participate in the investment gain or loss from the assets held
in this Account.
1.14. MATURITY DATE: The last day of a GA Account Term.
1.15. MATURED TERM VALUE: The amount payable on a GA Account Term's Maturity
Date.
1.16. VALUATION PERIOD: The period as of 4:00 p.m. Eastern time on each day the
New York Stock Exchange is open for business to 4:00 p.m. Eastern time of
the next such business day.
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II. GENERAL PROVISIONS
2.01. CHANGE OF CONTRACT: Except as provided below, only an authorized officer
of Aetna may change the terms of the Contract by notifying the Contract
Holder, in writing, at least 30 days before the effective date of the
change. Any change will not affect the amount or terms of any Annuity
which begins before the change.
Aetna may make a change that affects the GA Account Market Value
Adjustment (see 3.04(g)) with at least 30 days advance written notice to
the Contract Holder. Any such change shall become effective for any
present or future Participant.
Any change that affects the following provisions of this Contract will not
apply to existing Individual Accounts.
(a) Net Purchase Payment(s)
(b) Guaranteed GA Account Interest Rate
(c) Guaranteed Interest Rate - Fixed Account
(d) Net Return Factor(s) - Separate Account C
(e) Current Value
(f) Surrender Value
(g) Fund(s) Annuity Unit Value - Separate Account C
Any change that affects the Annuity Options and the tables for the
Options, cannot be made:
(a) Until at least 12 months after the Effective Date of this Contract;
and
(b) Until at least 12 months after the effective date of any such prior
change.
New Participants covered under this Contract on or after the effective
date of any change will be subject to the change. If the Contract Holder
does not agree to any change under this provision, no new Participants
will be covered under this Contract. Aetna will continue to accept
Purchase Payments for the Participants covered under this Contract before
the change. This Contract may also be changed as required by federal or
state law.
2.02. CHANGE OF FUND(S): Aetna, or the Separate Account may:
(a) Change the Fund(s) which may be invested in by Separate Account C;
and
(b) Replace the shares of any Fund(s) held in Separate Account C with
shares of any other Fund(s).
Changes must be:
(a) Approved by a majority vote of persons having an interest in Separate
Account C and the Fund(s);
(b) Deemed necessary by Aetna under the Investment Company Act of 1940;
or
(c) Deemed necessary by Aetna to accomplish the purpose of Separate
Account C.
Aetna will notify the Contract Holder of any change.
2.03. NONPARTICIPATING CONTRACT: The Contract Holder, Participants, or
beneficiaries will not have a right to share in the earnings of Aetna.
2.04. PAYMENTS: Aetna will make Annuity payments as and when due. Aetna will
make other payments within 7 days of receipt at its Home Office of a
written claim for payment which is in good order, except as provided in
3.18.
2.05. STATE LAWS: This Contract complies with the laws of the State of New
York. Any cash, death or Annuity payments are equal to or greater than
the minimum required by such laws. Annuity tables for legal reserve
valuation shall be as required by state law. Such tables may be different
from Annuity tables used to determine Annuity payments.
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2.06. CONTROL OF CONTRACT: The Contract Holder may make any choices allowed by
this Contract for the Employer Account and the Employee Account. Choices
made under this Contract must be in writing or in a form satisfactory to
Aetna. Until receipt of such choices in its Home Office, Aetna may rely
on any previous choices made. The Contract Holder may, however, by
written direction to Aetna, allow Participants to select the investment
options of the Employer Account and/or the Employee Account. No
distributions will be made from the Employer Account or the Employee Ac-
count without the Contract Holder's written direction to Aetna. The
Contract Holder may direct Aetna to make an in-service transfer pursuant
to IRS Revenue Ruling 90-24. Checks for in-service transfers will be made
payable only to the acquiring investment provider. Participants have no
rights to direct Aetna as to payments under the Contract unless
countersigned by the Contract Holder.
(a) Nontransferable and Nonassignable:
This Contract and any Individual Accounts are nontransferable and
non-assignable, except to Aetna in the event of a loan or pursuant to
a "qualified domestic relations order" as set forth under the
Retirement Equity Act of 1984 (REA). In the event a loan is
requested, the Current Value of the Employee Account necessary to
cover the loan amount plus interest must be assigned to Aetna.
(b) ERISA/REA Requirements:
The Contract Holder shall notify Aetna in writing of the
applicability of Title I of the Employee Retirement Income Security
Act of 1974 (ERISA), as amended by subsequent law including REA, to
the Plan. Aetna shall rely on the Contract Holder's determination
and representation of applicability. With respect to any
distribution made from an Employee or Employer Account from a
Contract subject to ERISA, the Contract Holder must certify in
writing that all the appropriate REA requirements have been met and
that the distribution is in accordance with the terms of the Plan.
(c) Participant Rights/Employee Account:
The Participant has a nonforfeitable right to the value of his or her
Employee Account pursuant to Code Section 403(b) and the terms of the
Plan as interpreted by the Contract Holder (see 1.06).
(d) Participant Rights/Employer Account:
The Participant has a nonforfeitable right to the value of his or her
Employer Account pursuant to the terms of, and to the extent of his
or her vested percentage under, the Plan as interpreted by the
Contract Holder. It is the Contract Holder's responsibility to
maintain records of the Participant's vesting percentages. Aetna
will not maintain nor keep such records.
The Contract Holder and each Participant hereunder have agreed in writing
to the above terms and conditions, to have the Contract Holder make all
choices under the Contract, and to be bound by the Contract Holder's
direction(s) to Aetna.
2.07. DESIGNATION OF BENEFICIARY: The Contract Holder is the beneficiary of the
Employer and Employee Account. Aetna will pay any portion of the
Individual Account(s) Current Value to the Plan beneficiary as directed by
the Contract Holder.
2.08. MISSTATEMENTS AND ADJUSTMENTS: If Aetna finds the age of any payee to be
misstated, the correct facts will be used to adjust payments.
2.09. INCONTESTABILITY: Aetna cannot cancel this Contract because of any error
of fact on the application.
2.10. GRACE PERIOD: This Contract will remain in effect even if Purchase
Payments are not continued.
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2.11. INDIVIDUAL CERTIFICATES: Aetna shall issue certificates to the Contract
Holder or Participants as required by the New York Insurance Laws. The
certificate will summarize certain provisions of the Contract.
Certificates are for information only and are not a part of the Contract.
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III. PURCHASE PAYMENT, CURRENT
VALUE, AND SURRENDER PROVISIONS
3.01. NET PURCHASE PAYMENT(S): The actual Purchase Payment less any premium
tax. Generally, Aetna will deduct the premium tax when Annuity benefits
are purchased (see Part IV). If Aetna determines that a premium tax is
due when Purchase Payments are received or at any other time, it will
deduct the tax at that time.
The Net Purchase Payment(s) may be credited among:
(a) The Fixed Account; and
(b) The Guaranteed Accumulation Account; and
(c) The Fund(s) in which the Separate Account invests.
Aetna must be told the percentage of the Net Purchase Payment(s) to be
applied to each investment above.
During any calendar year, the Contract Holder or, if allowed by the Plan,
the Participant may tell Aetna to change the investment mix twelve times.
Should Aetna allow additional changes, each may be subject to a fee of up
to $10.
3.02. INDIVIDUAL ACCOUNT: This Contract is issued to the Contract Holder.
However, Individual Accounts for Plan Participants are explained below.
Aetna will maintain two Individual Accounts for each Participant. These
will be:
(a) Employer Account: This Individual Account will be credited with
employer Net Purchase Payment(s); and
(b) Employee Account: This Individual Account will be credited with
employee Net Purchase Payment(s), specifically employee salary
reduction contributions.
In addition to any Purchase Payment(s) stated to be made to this Contract,
a lump-sum Purchase Payment(s), of not less than a minimum amount stated
by Aetna, may be made on behalf of one or more Participants. Aetna may
maintain an Individual Account for each lump sum payment. Such Individual
Account(s) will be designated as an Employer Account(s) or an Employee
Account(s) as instructed by the Contract Holder.
3.03. LIMITATION ON CONTRIBUTIONS: The Purchase Payment(s) made to a Partici-
pant's Individual Account(s) in any year cannot exceed the lesser of the
amount determined under the exclusion allowance of Code Section 403(b)(2)
or the annual additions limitation of Code Section 415(c)(1). In
addition, in no event may the Purchase Payment(s) attributable to elective
deferrals as defined in Code Section 402(g) exceed $9,500 (or, such larger
amount as adjusted by the Secretary of the Treasury) during any calendar
year, unless the alternate limitation of Code Section 402(g)(8) applies.
3.04. GUARANTEED ACCUMULATION ACCOUNT (GA ACCOUNT): The GA Account guarantees
stipulated rates of interest for stated periods of time (see (a) and (c)
below). Amounts withdrawn before the end of a Guaranteed Term may be
subject to a Market Value Adjustment (MVA) (see (g) below).
(a) Deposit Period - A calendar month, a calendar quarter, or any other
period of time specified by Aetna during which Net Purchase
Payment(s) and transfers are accepted into the GA Account for one or
more Guaranteed Terms.
(b) Guaranteed Term (Term) - The period of time for which interest rates
are guaranteed on Net Purchase Payment(s) and on transfers made into
a Deposit Period of
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the GA Account. Terms are offered at Aetna's discretion for various
lengths of time ranging up to and including ten years.
(c) Guaranteed Term Classifications - The grouping of Terms according to
their time to maturity. The following are the Classifications:
(1) Short-Term: Terms of up to and including 3 years; or
(2) Long-Term: Terms of greater than 3 years and up to and
including 10 years.
During a Deposit Period, Aetna may make available one or more Terms
within a Classification. The Contract Holder has the option to
allocate Net Purchase Payment(s) and transfers into any or all of the
available Deposit Period Terms. If no specific direction is given,
Net Purchase Payment(s) and transfers will go into available Terms on
a pro rata basis within the Classification(s) previously chosen by
the Contract Holder. At least one Term in the Short-Term
Classification will be available each Deposit Period.
(d) Guaranteed GA Account Interest Rates (Guaranteed Rates) - Aetna will
declare all interest rate(s) applicable to a specific Term at the
start of the Deposit Period for that Term. These rate(s) are
guaranteed by Aetna for that Deposit Period and the ensuing Term and
are not based on the actual investment experience of the underlying
assets in the GA Account. The Guaranteed Rates are annual effective
yields. The interest is credited daily at a rate that will produce
the guaranteed annual effective yield over the period of a year. No
annual rate will ever be less than 4%.
For Terms of one year or less, one Guaranteed Interest Rate is set
and announced for that full Term. For other Terms, there may be two
or more rates. All of these rate(s) may be set and announced for
that full Term. For other Terms, there may be two or more rates.
All of these rate(s) may be set and announced prior to the (*).
(e) Withdrawals from GA Account - Full or partial surrenders may be
requested at any time from the GA Account. However, amounts
withdrawn prior to the Maturity Date of a Term to satisfy a surrender
request may be subject to an MVA (see (g) below).
Full and partial surrenders are satisfied by withdrawing amounts from
each of the investment options in which the Individual Account is
invested (the Fund(s), the Fixed Account, the GA Account Short-Term
Classification and the GA Account Long-Term Classification) on a pro
rata basis. However, the Contract Holder may specify a particular
order in which investment options will be liquidated in order to
satisfy a partial surrender request.
For purposes of withdrawals, Terms within the GA Account Short-Term
and Long-Term Classifications are considered as two separate
investment options. Amounts will be removed within a GA Account
Classification starting with the Term still in effect with the oldest
Deposit Period. Any withdrawal which is a surrender will be subject
to the Maintenance Fee and Surrender Fee as appropriate.
Amounts may be transferred at any time subject to Contract
specifications (see 3.11, 3.12 or 3.13 below). Amounts transferred
prior to the Maturity Date of a Term are subject to an MVA (see (g)
below). Fund(s) will be removed within the elected Classification
starting with the Term still in effect with the oldest Deposit
Period.
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During the Deposit Period and the 90 days following the close of the
Deposit Period, any amounts applied to the GA Account during that
Deposit Period may not be withdrawn unless due to:
(1) A full or partial surrender;
(2) A payment of a premium for an Annuity Option; or
(3) The Sum Payable at Death provision.
(f) Maturity Date/Reinvestment - For all GA Account Term(s) existing as
of the effective date of this endorsement in addition to GA Account
Term(s) announced subsequent to that date, the Contract Holder or
Participant, as applicable, will be mailed a notice at least 18
calendar days before a Term's Maturity Date. This notice will
contain the current Deposit Period's Guaranteed Rate(s), Term(s) and
a projected Matured Term Value.
The Matured Term Value may be surrendered or transferred on the
Term's Maturity Date without an MVA. If no specific direction is
given by the Contract Holder or Participant, as applicable, prior to
the Maturity Date, each Matured Term Value will be reinvested in a
Term of the same duration. In the event that a Term of the same
duration is unavailable, each Matured Term Value will automatically
be reinvested in the next shortest Term available in the same
Classification during the then current Deposit Period. If however,
only one Term is available within the Classification, then the
Matured Term Value will automatically be reinvested in that Term.
Within two business days after the Maturity Date, the Contract Holder
or Participant, as applicable, will be mailed a confirmation
statement. This statement will state the Terms and Guaranteed Rates
which will apply to the reinvested Matured Term Value.
During the calendar month following the Term's Maturity Date, one
exception is allowed to the 90 day transfer restriction and MVA under
(e) and (g). This exception is applicable to each Matured Term Value
plus any interest accrued thereon, provided no part of the Matured
Term Value was transferred on the Maturity Date.
During this calendar month period, the Contract Holder may notify
Aetna's Home Office to transfer or surrender all or part of the
Matured Term Value plus any interest accrued thereon from the GA
Account without an MVA. This provision only applies to the first
such request received from the Contract Holder during this period for
any Matured Term Value. The Matured Term Value plus any interest
accrued thereon may be transferred upon such request without an MVA:
(1) To any other Terms of the GA Account available in the current
Deposit Period; or
(2) To any other allowable Fund(s).
If no such notification is given, the Matured Term Value will remain
subject to the terms and conditions of the new Term. All surrender
and transfer requests will be processed as of the date they are
received in good order at Aetna's Home Office.
(g) Market Value Adjustment (MVA) - There will be an MVA for a withdrawal
from the GA Account before the end of a Term when the withdrawal is
due to:
(1) A transfer;
(2) A full or partial surrender; or
(3) A payment of a premium for Annuity Option 2.
The amount of the withdrawal will be adjusted to a market value
amount as described below.
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The market value adjusted amount will be equal to the amount
withdrawn multiplied by the following ratio:
x
---
(1 + i) 365
-----------
x
---
(1 + j) 365
Where: i is the Deposit Yield
j is the Current Yield
x is the number of days remaining, (computed from Wednesday
of the week of withdrawal) in the Guaranteed Term.
The Deposit Period Yield will be determined as follows:
- At the close of the last business day of each week of the
Deposit Period, a yield will be computed as the average of the
yields on that day of U.S. Treasury Notes which mature in the
last three months of the Guaranteed Term.
- The Deposit Period Yield is the average of those yields for the
Deposit Period. If withdrawal is made prior to the close of the
Deposit Period, it is the average of those yields on each week
preceding withdrawal.
The Current Yield is the average of the yields on the last business
day of the week preceding withdrawal on the same U.S. Treasury Notes
included in the Deposit Period Yield.
In the event that no U.S. Treasury Notes which mature in the last
three months of the Guaranteed Term exist, Aetna reserves the right
to use the U.S. Treasury Notes that mature in a following quarter.
Full and partial surrenders as well as transfers made within six
months on the date of death of the Participant under the Sum Payable
at Death provision will be the greater of:
- The aggregate MVA amount which is the sum of all market value
adjusted amounts calculated due to a withdrawal of amounts (for
surrender or transfer) from Terms prior to the end of those
Terms. The aggregate MVA may be either positive or negative; or
- The applicable portion of the Current Value in the GA Account.
After the six month period, the surrender or transfer will be the
aggregate MVA amount (i.e., including all MVAs).
The greater of the aggregate MVA amount or the applicable portion of
the Current Value in the GA Account is applied to amounts withdrawn
from the GA Account for payment of a premium under Annuity Options 3
or 4.
Aetna may make any change to Section 3.02 or 3.03 with 30 days
advance written notice to the Contract Holder. Any such change shall
become effective for Purchase Payment(s), transfers or reinvestments
made to any new Term by any present or future Participant.
A detailed description of the Market Value Adjustment has been filed
with the New York Insurance Department Superintendent in compliance
with Section 4223(a)(1)(C) of the New York Insurance Law.
(h) Deposits to the GA Account - All amounts in the GA Account
under the Short-Term Classification are made to the General
Account.
All amounts in the GA Account under the Long-Term
Classifications are made to a Nonunitized Separate Account.
There are no discrete units for this Nonunitized Separate
Account. The Contract Holder or Participant, as applicable,
does not participate in the gain or loss from the
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assets held in the Nonunitized Separate Account. Such gain or
loss is borne entirely by Aetna. These assets may be chargeable
with liabilities arising out of any other business of Aetna.
For terms under both the Short-Term and Long-Term
Classifications, Aetna guarantees stipulated interest rates to
be credited to the GA Account. All assets of Aetna including
amounts made to the GA Account are available to meet the
guarantees under the GA Account.
3.05. GUARANTEED INTEREST RATE - FIXED AC-COUNT: On any Purchase Payment(s)
made to the Fixed Account, Aetna will add interest daily at any annual
rate no less than 4%. Aetna may add interest daily at any higher rate
determined by its Board of Directors.
3.06. EXPERIENCE CREDITS: Aetna may apply Experience Credits under this
Contract. Any such Credits will be computed as decided by Aetna.
3.07. MAINTENANCE FEE: The Maintenance Fee (see 5.01) will be deducted from the
Current Value of the Employee and Employer Account on each anniversary of
the Individual Account effective date and upon surrender of the entire
Individual Account unless otherwise directed by the Contract Holder.
3.08. FUND(S) RECORD UNITS - SEPARATE ACCOUNT C: The portion of the Net
Purchase Payment(s) applied to Separate Account C will determine the
number of Fund's Record Units. This number is equal to a Net Purchase
Payment applied to the Fund divided by the Fund Record Unit Value (see
3.10) for the Valuation Period in which the Purchase Payment is received
in good order.
3.09. NET RETURN FACTOR(S) - SEPARATE ACCOUNT C: The Net Return Factors are
used to compute all Separate Account C Values and payments for any Fund.
The Net Return Factor for each Fund is equal to 1.0000000 plus the Net
Return Rate.
The Net Return Rate is equal to:
(a) The value of the shares of the Fund held by Separate Account C at the
end of a Valuation Period; minus
(b) The value of the shares of the Fund held by Separate Account C at the
start of the Valuation Period; plus or minus
(c) Taxes (or reserves for taxes) on Separate Account C (if any); divided
by
(d) The total value of the Fund Record Units and Fund Annuity Units of
Separate Account C (see 3.10 and 4.06) at the start of the Valuation
Period; minus
(e) A daily actuarial charge at an annual rate of 1.25% for Annuity
mortality and expense risks and profit and a daily administrative
charge which will not exceed 0.25% on an annual basis. The
administrative charge may be changed annually except for amounts
which have been used to purchase an Annuity.
A Net Return Rate may be more or less than 0.
The value of a share of the Fund is equal to the net assets of the Fund
divided by the number of shares outstanding.
3.10. FUND RECORD UNIT VALUE - SEPARATE ACCOUNT: A Fund's Record Unit Value is
computed by multiplying the Net Return Factor for the current Valuation
Period by the Fund's Record Unit Value for the previous Period. The
dollar value of a Fund's Record Unit, Separate Account C assets, and
Variable Annuity payments may go up or down due to investment gain or
loss.
3.11. CURRENT VALUE: The Current Value is equal to:
(a) Any amounts in the Fixed Account, including Fixed Account interest
added by Aetna; plus
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(b) Any amounts in the GA Account, including GA Account interest added
by Aetna; plus
(c) The sum of any Separate Account C Record Unit Value(s); plus
(d) Any amount due to Experience Credits; less
(e) Any Maintenance Fee(s) due.
Current Value does not include amounts used to purchase an Annuity.
3.12. TRANSFER OF CURRENT VALUE FROM THE FUNDS OR GA ACCOUNT: Before an Annuity
Option is elected, all or any portion of the Current Value may be
transferred from any Fund or the GA Account to:
(a) Any other Fund;
(b) The Fixed Account; or
(c) The GA Account's current Deposit Period.
Amounts in a specific GA Account Term cannot be transferred to the Deposit
Period of another Term within the same Classification except at the Term's
Maturity.
Amounts applied to Classifications of the GA Account may not be
transferred to the Fund(s) during the Deposit Period or for 90 days after
the close of the Deposit Period.
Transfers from the GA Account are subject to the Withdrawal and Market
Value Adjustment provisions. (See 3.04(e) and (g).)
For each Individual Account, twelve transfers of Current Value (excluding
transfers from the GA Account at the end of a Guaranteed Term) can be made
during a calendar year period. Should Aetna allow additional transfers,
each may be subject to a fee of up to $10.
3.13. TRANSFER OF CURRENT VALUE FROM THE FIXED ACCOUNT: Before an Annuity
Option is elected, 10% of the Current Value held in the Fixed Account may
be transferred to any Fund(s). Such transfer will be:
(a) Without charge; and
(b) Allowed once per calendar year.
Aetna may, on a temporary basis, allow any larger percent to be
transferred.
The Current Value of the Fixed Account, as used above, is the value when
the request is received at the Home Office of Aetna.
3.14. LOAN VALUE: During the accumulation period, the Contract Holder may
request a loan on behalf of a Participant from the Employee Account by
submitting a loan request form to Aetna's Home Office. If there is more
than one Employee Account, a separate loan request form is required for
each Employee Account. If a Contract is subject to ERISA, the Contract
Holder must provide written certification to Aetna that the REA
requirements have been satisfied before the loan will be made. A loan for
any Participant will not be allowed within 12 months from the date of any
prior loan for that Participant. The Loan Effective Date will be the
date the Home Office receives the loan request form and, if required,
certification of REA compliance, in good order. All loans are subject to
the following conditions:
(a) The minimum Employee Account Current Value must be $2,000. The loan
amount must be at least $1,000. The loan amount may not exceed the
lesser of:
(1) 50% of the Employee Account Current Value reduced by any
outstanding loan balance(s) on the date on which the loan is
made; or
(2) $50,000 reduced by the highest outstanding balance(s) of loans,
during the preceding 12 months ending on the day before the
current loan is made.
(b) The values in the Fund(s), Fixed Account and GA Account are included
in determining the Employee Account Current Value for purposes of
paragraph (a). However, only amounts held in the Fund(s) and Fixed
Account are available for making the
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actual loan from the Employee Account. If a Contract Holder intends
to request a loan in excess of the Current Value of the Fund(s) and
the Fixed Account in the Employee Account, the excess amount must
first be transferred from the GA Account to any other Fund(s) or to
the Fixed Account. Amounts transferred from the GA Account will be
subject to the GA Account withdrawal and Market Value Adjustment
(MVA) provisions (see 3.04(e) and (g)). Aetna reserves the right to
restrict or limit the amount that may be loaned from any investment
option at any time.
When a loan is made, the number of accumulation units equal to the
loan amount will be withdrawn from the Employee Account. The amount
of the loan to be made will be withdrawn on a pro rata basis from the
Fixed Account and from each of the Fund(s). Accumulation units
withdrawn from the Employee Account to provide a loan do not
participate in the investment experience of the investment options
from which they were withdrawn.
(c) On the first business day of each calendar month, Aetna will
determine a Loan Interest Rate. This rate will be equal to Moody's
Corporate Bond Yield Average-Monthly Average Corporates as published
by Moody's Investors Service, Inc. for the calendar month beginning
two months before the date on which the new Loan Interest Rate is
effective. The Loan Interest Rate for the calendar month in which
the loan is effective will apply for one year from the Loan Effective
Date. Annually on the anniversary of the Loan Effective Date, the
rate will be adjusted to equal the Loan Interest Rate determined for
the month in which the loan anniversary occurs.
(d) Principal and interest on loans must be amortized in quarterly
installments over a 5-year term. If the Loan Interest Rate is
adjusted, future repayments will be adjusted so that the outstanding
loan balance is amortized in equal quarterly installments over the
remaining term. A quarterly processing fee equal to .74% of the
outstanding loan balance will be deducted from each repayment and re-
tained by Aetna. The remainder of each repayment will be credited to
the Employee Account. Repayment amounts credited to the Employee
Account will be allocated among the same investment options and in
the same proportions as amounts were withdrawn to make the loan.
(e) A bill in the amount of the quarterly repayment due will be mailed
to the Participant in advance of the repayment due date. The
repayment due date will be the first business day of the third
calendar month following the 7th calendar day after the loan
effective date. The repayment will be in default if it is not
received by Aetna at its Home Office before the end of the month in
which the due date falls.
(f) If a repayment is in default, an amount equal to the repayment amount
and any applicable Surrender Fee will be deducted from the Employee
Account as a deemed partial surrender. The date of the surrender
will be the first business day following the last day of the month in
which the repayment was due. The surrendered amount will
automatically be applied to make the repayment that is in default and
will thereafter be subject to (d).
(g) If a repayment is received in excess of a billed amount, the excess
will be applied towards the Employee Account principal portion of
the outstanding loan. Repayments received which are less than the
billed amount will be returned to the Participant; therefore, the
repayment will be in default and (f) will apply.
(h) Prepayment of the entire loan balance will be allowed. At the time
of prepayment, Aetna will bill the Participant for any accrued Loan
Interest, which will be
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<PAGE>
applied in accordance with (d). Aetna will consider the loan paid
when this amount is received.
(i) If the Employee Account is surrendered while there is an outstanding
loan balance, accrued Loan Interest and any applicable Surrender Fee
will be deducted from the Employee Account Current Value.
(j) Upon the election of an Annuity Option or the Participant's death,
the loan will be canceled resulting in a distribution of the
outstanding loan balance. Accrued Loan Interest will be deducted
from the Employee Account Current Value and this interest will then
be treated as a quarterly repayment under (d).
3.15. NOTICE TO THE CONTRACT HOLDER: Aetna will notify the Contract Holder each
year of:
(a) The value of any amounts held in:
(1) The Fixed Account;
(2) The GA Account;
(3) The Fund(s) for Separate Account C;
(b) The number of any Fund(s) Record Units;
(c) The Fund(s) Record Unit Value(s); and
(d) The Surrender Values of these amounts.
Such number or values will be as of a date no more than 60 days before the
date of the notice.
3.16. DISTRIBUTION OPTIONS: The following distribution options may be elected
by the Contract Holder on behalf of the Participant.
(a) Estate Conservation Option (ECO): A distribution option under which
a portion of the Individual Account(s) Current Value will
automatically be surrendered and distributed each year.
(1) An ECO payment will be determined in the following manner:
a. Payments will commence no earlier than the year in which
the Participant attains age 70 1/2, and will be calculated
on the full Current Value of the Individual Account(s),
except as provided in "b".
b. If Aetna maintains separate records of the value of the
account as of December 31, 1986, (see below), payments made
on or after the year in which the Participant attains age
70 1/2 and before the year in which the Participant attains
age 75 will only be calculated on amounts contributed after
December 31, 1986, plus all interest credited on all
amounts after that date. The method under this rule is
elected by the Contract Holder and will no longer be
effective if the Contract Holder submits a withdrawal
request in addition to a scheduled ECO payment from the
Individual Account(s), at which time ECO payments will then
be determined under "a".
Aetna will maintain separate records if the Contract Holder
has not requested any withdrawals from the Participant's
Individual Account(s) since December 31, 1986. If a
Participant attained age 70 1/2 prior to 1988 or is a
Participant in a governmental or church plan, the
Participant must be retired in order to qualify under "b".
(2) Amount of Distribution: Each year that ECO is in effect, Aetna
will calculate and distribute an amount equal to the minimum
required distribution under the Code. The annual distribution
will be determined by
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<PAGE>
dividing the Individual Account(s) Current Value, including
any current loan(s) outstanding, as of December 31 of the year
prior to the year for which the payment is to be made, by a life
expectancy factor.
As elected by the Contract Holder, the factor is either the
single life or joint life expectancy based on tables in Section
401(a)(9) of the Code or related regulations. If joint life
expectancy is elected and the Participant or spouse dies, pay-
ments will be calculated based on the survivor's life
expectancy.
These calculations may be changed as necessary to comply with
the Code minimum distribution rules. The joint life expectancy
factor can only be elected based on the joint life expectancy of
the Participant and his or her spouse, and such spouse must be
named as the Plan beneficiary of any death benefits under the
Contract while ECO is in effect.
(3) Minimum Current Value: At its discretion, Aetna may require a
minimum initial Current Value for election of this option. If
after election of this option the Current Value is insufficient
to make a scheduled ECO payment, Aetna will distribute the
entire balance of the Individual Account(s).
(4) Date of Distribution: The Contract Holder shall specify the
initial distribution date. The earliest date is the first day
of the calendar year in which the Participant attains age 70
1/2. Subsequent distributions will be made annually on the 15th
of the month the initial payment was made or such other date
Aetna may designate or allow.
(5) Elections and Revocation: ECO may be elected by the Contract
Holder, on behalf of the Participant, by submitting a completed
and signed election form to Aetna's Home Office. If the
Contract Holder has notified Aetna that the Plan is subject to
Title I of the Employee Retirement Income Security Act of 1974
as amended, the Contract Holder must also certify in writing
that all the appropriate REA requirements have been met and that
the distribution is in accordance with the terms of the Plan.
Once elected, this option may be revoked by the Contract Holder
by submitting a written request to Aetna at its Home Office.
Any revocation will apply only to amounts not yet paid. ECO may
be elected only once per participant.
(6) Reservation of Rights: Aetna reserves the right to change the
terms of ECO for future elections and discontinue the
availability of this option after proper notification. Aetna
also reserves the right to allow payments to be made more
frequently than annually.
(b) Systematic Withdrawal Option (SWO): A distribution option under
which a portion of the Individual Account(s) Current Value
attributable to a particular Participant will automatically be sur-
rendered and distributed each year.
(1) Amount of Distribution: The Contract Holder may elect one of
the two payment methods described below.
(a) Specified Amount: Payments of a designated dollar amount
which must be no greater than 10% of the initial Current
Value and shall remain constant unless a higher amount is
required under Code minimum distribution rules. Each year
that the Specified Amount is in effect, Aetna will
calculate the minimum required distribution
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<PAGE>
under the Code and distribute this amount if it is larger
than the amount elected by the Contract Holder. The life
expectancy factor for this purpose will be the
Participant's life expectancy at the time of the election
of this option, and with each subsequent calendar year the
factor will be reduced by one. The minimum required
distribution will be determined by dividing the Individual
Account Current Value, including any current loan(s)
outstanding, as of December 31 of the year prior to the
year for which the payment is to be made, by a life
expectancy factor. At its discretion, Aetna may require a
minimum initial payment amount; or
(b) Specified Period: Payments which are made over a period of
time which must be at least 10 years, unless otherwise
required by Code minimum distribution rules. The maximum
specified period will be limited by the Code minimum
distribution rules. The annual amount paid each year is
calculated by dividing the Individual Account(s) Current
Value as of December 31 of the prior year, including any
outstanding loan(s), by the number of payment years
remaining.
The life expectancy factor is either the single life or joint
life expectancy, as elected by the Contract Holder, based on
tables in Section 401(a)(9) of the Code or related regulations.
If the joint life expectancy is elected, upon the death of
either the Participant or the spouse, the minimum required
distribution for the Specified Amount payment method will
continue to be calculated in the same manner as described in
(b)(1). Payments upon the Participant's death will continue in
the manner described above, unless the Contract Holder on behalf
of the spouse elects an alternate payment mode. Any mode
elected must provide payments to be made at least as rapidly as
those made prior to the Participant's death.
These calculations may be changed as necessary to comply with
the Code minimum distribution rules. The joint life expectancy
factor can only be elected based on the joint life expectancy of
the Participant and his or her spouse, and such spouse must be
named as the Plan beneficiary of any death benefits under the
Contract while SWO is in effect.
(2) Minimum Initial Current Value: At its discretion, Aetna may
require a minimum initial Current Value for election of this
option. If after election of this option the Current Value is
insufficient to make a scheduled SWO payment, Aetna will
distribute the entire balance of the Individual Account(s).
(3) Date of Distribution: The Contract Holder shall specify the
initial distribution date. The earliest date is the first day
of the calendar year in which the Participant attains age 70
1/2.
SWO payments will be made annually. Subsequent distributions
will be made annually on the 15th of the month the initial
payment was made or such other date Aetna may designate or
allow.
(5) Elections and Revocation: SWO may be elected by the Contract
Holder by submitting a completed and signed election form to
Aetna's Home Office. If the Contract Holder has notified Aetna
that the TDA Plan is subject to Title I of the Employee
Retirement Income Security Act of 1974 as amended, the Contract
Holder must
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<PAGE>
also certify in writing that all the appropriate REA
requirements have been met and that the distribution is in
accordance with the terms of the Plan.
Once elected, this option may be revoked by the Contract Holder
by submitting a written request to Aetna at its Home Office.
Any revocation will apply only to amounts not yet paid. SWO may
be elected only once.
(6) Reservation of Rights: Aetna reserves the right to change the
terms of SWO for future elections and discontinue the
availability of this option after proper notification. Aetna
also reserves the right to allow payments to be made more
frequently than annually.
3.17. SUM PAYABLE AT DEATH (BEFORE ANNUITY PAYMENTS START): The Employee
Account Current Value payable under the terms of this section will be
reduced by the amount of the accrued interest on any outstanding loan.
Aetna will pay any portion of the Individual Account(s) Current Value to
the individual and in the manner directed in writing by the Contract
Holder when:
(a) The Participant dies before Annuity payments start; and
(b) The notice of death is received in good order by Aetna.
The sum payable will be the Current Value on the date when the notice is
received in good order. The Contract Holder may choose to apply any sum
under an Annuity Option (see Annuity Provisions), subject to any other
terms and conditions of this Contract, or to have the Current Value paid
in a lump sum.
If the payee of the death proceeds is the Participant's surviving spouse
(as the Participant's designated beneficiary under the Plan), the first
Annuity payment or the lump sum payment may be deferred to a date not
later than when the Participant would have attained age 70 1/2 or such
later date as may be allowed under federal law or regulations. If the
payee is not the surviving spouse, all of the Current Value must either be
applied to an Annuity Option within one year of the Participant's death or
be paid to the payee within 5 years of the Participant's death (see Part
IV).
3.18. SURRENDER VALUE: After deduction of the Maintenance Fee (if any), the
amount payable by Aetna upon the surrender of any portion of an
Individual Account shall be reduced by a Surrender Fee. The Surrender
Fee will be in accordance with the Surrender Fee table in 5.02.
To comply with Section 4223 of New York insurance Laws, the surrender
charge will never be greater than (a) plus (b) below:
(a) 10% of amounts surrendered from options other than the GA Account;
plus
(b) 10%, reduced (but not below zero) by one percent for each year the
Contract has been inforce, of amounts surrendered from the GA
Account. Aetna reserves the right to compute the surrender charge
for amounts transferred into the GA Account within 90 days prior to
surrender as if such amounts had not been transferred.
The Fee on a total surrender of an Individual Account will not exceed 8.5%
of the actual Purchase Payments made to that Account.
For a partial or full surrender from any Individual Account, Aetna must
receive written direction from the Contract Holder on a form acceptable to
Aetna. If the Contract is subject to ERISA, this direction must include
certification that all of the REA requirements have been satisfied.
Aetna may defer payment of the surrender value until appropriate Contract
Holder certification is received.
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<PAGE>
3.19. SURRENDER RESTRICTIONS: Limitations apply to full and partial surrenders
of the Restricted Amount from this Contract, as required by Code Section
403(b)(11). The Restricted Amount is the sum of:
(a) Net Purchase Payments attributable to Participant salary reduction
contributions made on and after January 1, 1989; plus
(b) The net increase, if any, in the Current Value of the Employee
Account after December 31, 1988 attributable to investment gains and
losses and credited interest.
The Restricted Amount may be fully or partially surrendered only if one
or more of the following conditions are met:
(a) The Participant has reached age 59 1/2;
(b) The Participant has separated from service;
(c) The Participant has died;
(d) The Participant has become disabled, within the meaning of Code
Section 72(m)(7); or
(e) The withdrawal is otherwise allowed by federal law, regulations or
rulings.
A full or partial surrender is also allowed if the Participant incurs a
"hardship" as that term is defined in the Code or regulations under Code
Section 403(b). However, the amount available for hardship is limited to
the lesser of the amount necessary to satisfy the need, or the Net
Purchase Payments attributable to Participant salary reduction
contributions made on and after January 1, 1989.
The Contract Holder must certify that one of these conditions has been met
before a surrender request will be considered to be in good order. The
Contract Holder must notify Aetna in writing when a lump sum payment is to
be made or Annuity payments are to commence.
If, pursuant to Revenue Ruling 90-24, amounts are transferred to this
Contract from a Code Section 403(b)(7) custodial account, the December 31,
1988 value from such transferred amount may be distributed upon the
Contract Holder's request. The Contract Holder must certify that one of
the conditions mentioned above has been met or that the Participant has
incurred a hardship. The remaining transferred value from the Employee
Account will be considered a Restricted Amount subject to the Surrender
Restrictions of this subsection.
3.20. TIMING OF DISTRIBUTIONS: The distribution of benefits accrued after
December 31, 1986, must be made in a lump sum or must begin not later than
the April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2. However, for a Participant who attained
age 70 1/2 before January 1, 1988, the distribution of such benefits must
be made or must begin not later than the April 1 of the calendar year
following the calendar year in which the Participant retires.
The above does not apply if the Contract Holder is a governmental entity
or a church. For Participants of such an employer, the distribution of
benefits accrued after December 31, 1986, must be made or must begin not
later than the April 1 of the calendar year following the calendar year in
which the Participant attains age 70 1/2 or retires, whichever occurs
later.
The required distribution described in either of the above rules must be
made over the life of the Participant (or the joint lives of the
Participant and the Plan beneficiary) or over a period not exceeding the
life expectancy of the Participant (or the joint life expectancies of the
Participant and the Plan beneficiary).
If the Contract Holder does not request commencement of benefits as
described above, Aetna will not be responsible for compliance
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<PAGE>
with the Code Section 401(a)(9) minimum distribution requirements and for
any adverse tax consequences that may result.
3.21. PAYMENT OF SURRENDER VALUE: Under certain emergency conditions, Aetna may
defer payment:
(a) For a period of up to 6 months (unless not allowed by state law); and
(b) As provided by federal law.
Aetna may pay any Fixed Account Surrender Value with interest in equal
payments over a period not to exceed 60 months when the amount held in
the Fixed Account under this Contract exceeds $250,000. This will apply
only if the sum of the amounts surrendered within the past 12 months
exceeds 20% of such Fixed Account amount.
Interest, as used above, will not be more than two percentage points below
any rate determined prospectively by the Board of Directors for this class
of Contract. In no event will the interest rate be less than 4%.
3.22. REINSTATEMENT: All or a portion of the proceeds of a full surrender of
this Contract may be reinvested within 30 days after the surrender if
allowed by law. Any Maintenance Fee and Surrender Fee charged at the time
of surrender on the amount being reinvested will be included in the
reinstatement. Any Market Value Adjustment deducted from GA Account
surrenders will not be included in the reinstatement. Amounts will be
reinstated among the Fixed Account, GA Account, and the Fund(s) in the
same proportion as they were at the time of surrender. Any amounts
reinstated to the GA Account will be credited to the current Deposit
Period. The number of Record Units reinstated will be based on the Record
Unit Value(s) next computed after receipt at Aetna's Home Office of the
reinstatement request and the amount to be reinvested.
Any Maintenance Fee which falls due after the surrender and before the
reinstatement will be deducted from the amount reinstated.
Reinstatement is permitted only once.
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<PAGE>
IV. ANNUITY PROVISIONS
4.01. CHOICES TO BE MADE: The Contract Holder may elect an Annuity Option on
behalf of a Participant by telling Aetna to pay all or any portion of the
Current Value (minus any premium tax) as a premium for an Annuity under
Option 2, 3, or 4 (see 4.07). The present value of the expected payments
to the Annuitant when payments start shall be determined in accordance
with the tables under Code Section 401(a)(9) regulations in order to
comply with the incidental death benefit test. This restriction does not
apply if Option 4(e) is chosen and the second Annuitant is the spouse of
the Annuitant.
Generally, the first Annuity payment must be made no later than the April
1 of the calendar year following the year in which the Participant turns
age 70 1/2 or such later date as may be allowed under federal law or
regulations (see 3.20). For distributions taken in a lump sum, see
Surrender Value (3.17).
For an election of an Annuity Option, the Contract Holder must provide
certification that the REA requirements, as applicable, and Code Section
403(b)(11) withdrawal restrictions have been satisfied.
When an Annuity Option is chosen, Aetna must also be told if payments are
to be made other than monthly and to pay:
(a) A Fixed Annuity using the General Account;
(b) A Variable Annuity using any of the Fund(s) made available by Aetna
for Annuity purposes; or
(c) A combination of (a) and (b).
If a Fixed Annuity is chosen, Aetna will add interest daily at an annual
rate no less than 3.5%. Aetna may add interest daily at any higher rate.
If a Variable Annuity is chosen, an Assumed Annual Net Return Rate of 5%
may be chosen. If not chosen, Aetna will use an Assumed Annual Net Return
Rate of 3.5%.
With the exception of Option 2 on a variable basis, once elected, an
Annuity Option may not be revoked.
4.02. ANNUITY PAYMENTS TO ANNUITANT: In no event may any payments to the
Annuitant under any Annuity Option extend beyond:
(a) The life of the Annuitant;
(b) The lives of the Annuitant and the Plan beneficiary;
(c) A period certain greater than the Annuitant's life expectancy
according to regulations under Code Section 401(a)(9), determined as
of the date payments are to commence; or
(d) A period certain greater than the life expectancies of the Annuitant
and the Plan beneficiary according to regulations under Code Section
401(a)(9) determined as of the date payments are to begin.
4.03. DEATH OF ANNUITANT: When an Annuitant dies under Options 2, and 3, the
present value of any remaining guaranteed payments will be paid in one sum
to the Plan beneficiary as directed in writing by the Contract Holder, or
upon election by the Annuitant's Plan beneficiary, any remaining payments
will continue to the Plan beneficiary. If no Plan beneficiary exists, the
present value of any remaining guaranteed payments will be paid in one
lump sum to the Contract Holder.
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<PAGE>
In no event may any payments to the Plan beneficiary under an Annuity
Option extend beyond:
(a) The life of the payee determined as of the date payments are to
commence; or
(b) Any certain period greater than the payee's life expectancy as
determined by regulations under Code Section 401(a)(9) as of the date
payments are to begin.
However, if a Plan beneficiary dies while under Option 1 or while
receiving Annuity payments, the present value of any remaining payments
will be paid in one lump sum to the estate of the Plan beneficiary. The
interest rate used to determine the first payment will be used to
calculate the present value.
4.04. FUND(S) ANNUITY UNITS - SEPARATE ACCOUNT C: The number of Fund(s)
Annuity Units is based on the amount of the first Variable Annuity payment
which is equal to:
(a) The portion of the Current Value (minus any premium tax) applied to
pay a Variable Annuity; divided by
(b) 1,000; multiplied by
(c) The payment rate for the Option chosen.
Such amount, or portion, of the Variable Payment will be divided by the
appropriate Fund(s) Annuity Unit Value (see 4.05) on the tenth Valuation
Period before the due date of the first payment to determine the number of
each Fund Annuity Units. The number of each Fund Annuity Units remains
fixed. Each future payment is equal to the sum of the products of each
Fund Annuity Unit Value multiplied by the appropriate number of Units.
The Fund Annuity Unit Value on the tenth Valuation Period prior to the due
date of the payment is used.
4.05. FUND(S) ANNUITY UNIT VALUE - SEPARATE ACCOUNT C: For any Valuation
Period, a Fund(s) Annuity Unit Value is equal to:
(a) The Value for the previous Period; multiplied by
(b) The Net Return Factor(s) (see 3.08) for the Period; multiplied by
(c) A factor to reflect the Assumed Annual Net Return Rate.
The factor for 3.5% per year is .9999058; for 5% per year it is .9998663.
The dollar value of the Fund(s) Annuity Unit Values and payments may go up
or down due to investment gain or loss.
If Variable Annuity payments are not to decrease, Aetna must earn a gross
return on the assets of the Separate Account C of:
- 4.75% on an annual basis plus an annual return of up to 0.25% needed
to offset the administrative charge set at the time Annuity payments
commence if an Assumed Annual Net Return Rate of 3.5% is chosen; or,
- 6.25% on an annual basis plus an annual return of up to 0.25% needed
to offset the administrative charge set at the time Annuity payments
commence if an Assumed Annual Net Return Rate of 5% is chosen.
Payments shall not be changed due to changes in the mortality or expense
results or administrative charges.
4.06. ANNUITY OPTIONS:
Option 1 - Payments of Interest on Sum Left with Aetna - This Option may
be used only by the Plan beneficiary when the Participant dies before
Aetna has started paying an Annuity. A portion or all of the sum paid
upon death may be held under this Option and will be held in the General
Account of Aetna at interest (see 4.01). The Contract Holder, on behalf
of the Plan beneficiary, may later tell Aetna to:
(a) Pay a portion or all of the sum held by Aetna; or
(b) Apply a portion or all of the sum held by Aetna to any Annuity Option
below.
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<PAGE>
If the Plan beneficiary is the Participant's surviving spouse, the lump-
sum payment may be deferred to a date not later than when the Participant
would have attained age 70 1/2.
If the Plan beneficiary is not a spouse, the Contract Holder must tell
Aetna to pay the full sum within 5 years after the death of the
Participant.
Option 2 - Payments for a Stated Period of Time - An Annuity will be paid
for the number of years chosen. The number of years must be at least 3
and not more than 30.
If payments for this Option are made under a Variable Annuity, the present
value of any remaining payments may be withdrawn at any time. If a
withdrawal is requested within 3 years after the start of payments, it
will be treated as a surrender (see 3.17).
Option 3 - Life Income - An Annuity will be paid for the life of the
Annuitant. If also chosen, Aetna will guarantee payments for 60, 120,
180, or 240 months.
Option 4 - Life Income for Two Payees - An Annuity will be paid during the
lives of the Annuitant and a second Annuitant. At the death of either,
payments will continue to the survivor. When this Option is chosen, a
choice must be made of:
(a) 100% of the payment to continue to the survivor;
(b) 66 2/3% of the payment to continue to the survivor;
(c) 50% of the payment to continue to the survivor; or
(d) Payments for a minimum of 120 months, with 100% of the payment to
continue to the survivor.
(e) 100% of the payment to continue to the survivor if the survivor is
the Annuitant and 50% of the payment to continue to the survivor if
the survivor is the second Annuitant.
Other Options - Aetna may make other options available as allowed by the
laws of the state in which this Contract is delivered.
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<PAGE>
OPTION 2
PAYMENTS FOR A STATED PERIOD OF TIME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
YEARS OF AMOUNT OF YEARS OF AMOUNT OF YEARS OF AMOUNT OF
PAYMENTS PAYMENTS PAYMENTS PAYMENTS PAYMENTS PAYMENTS
- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
3 $29.19 13 $7.94 22 $5.39
4 22.27 14 7.49 23 5.24
5 18.12 15 7.10 24 5.09
6 15.35 16 6.76 25 4.96
7 13.38 17 6.47 26 4.84
8 11.90 18 6.20 27 4.73
9 10.75 19 5.97 28 4.63
10 9.83 20 5.75 29 4.53
11 9.09 21 5.56 30 4.45
12 8.46
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
YEARS OF AMOUNT OF YEARS OF AMOUNT OF YEARS OF AMOUNT OF
PAYMENTS PAYMENTS PAYMENTS PAYMENTS PAYMENTS PAYMENTS
- -------- -------- -------- -------- -------- --------
3 $29.80 13 $8.64 22 $6.17
4 22.89 14 8.20 23 6.02
5 18.74 15 7.82 24 5.88
6 15.99 16 7.49 25 5.76
7 14.02 17 7.20 26 5.65
8 12.56 18 6.94 27 5.54
9 11.42 19 6.71 28 5.45
10 10.51 20 6.51 29 5.36
11 9.77 21 6.33 30 5.28
12 9.16
</TABLE>
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<PAGE>
OPTION 3
LIFE INCOME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
-------------------------------------------------
<TABLE>
<CAPTION>
AGE OF
ANNUITANT NONE 60 120 180 240
- --------- ---- -- --- --- ---
<S> <C> <C> <C> <C> <C>
50 $4.34 $4.34 $4.31 $4.27 $4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
</TABLE>
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
27
<PAGE>
OPTION 3
LIFE INCOME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
-------------------------------------------------
<TABLE>
<CAPTION>
AGE OF
ANNUITANT NONE 60 120 180 240
- --------- ---- -- --- --- ---
<S> <C> <C> <C> <C> <C>
50 $5.26 $5.25 $5.22 $5.17 $5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 5.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
</TABLE>
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
28
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
100% TO THE SURVIVOR
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
AGE OF SECOND ANNUITANT
-----------------------
<TABLE>
<CAPTION>
AGE OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.69 $3.75 $3.81 $3.84 $3.87 $3.90 $3.91 $3.92 $3.92
50 3.75 3.89 3.97 4.04 4.09 4.13 4.15 4.17 4.18
55 3.81 3.97 4.16 4.27 4.35 4.42 4.47 4.50 4.51
60 3.84 4.04 4.27 4.51 4.66 4.78 4.86 4.92 4.95
65 3.87 4.09 4.35 4.66 4.99 5.19 5.35 5.46 5.53
70 3.90 4.13 4.42 4.78 5.19 5.67 5.95 6.17 6.31
75 3.91 4.15 4.47 4.86 5.35 5.95 6.64 7.04 7.34
80 3.92 4.17 4.50 4.92 5.46 6.17 7.04 8.04 8.63
85 3.92 4.18 4.51 4.95 5.53 6.31 7.34 8.63 10.05
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
AGE OF SECOND ANNUITANT
-----------------------
AGE OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
45 $4.63 $4.68 $4.73 $4.77 $4.80 $4.82 $4.84 $4.85 $4.86
50 4.68 4.80 4.88 4.95 5.00 5.04 5.06 5.08 5.10
55 4.73 4.88 5.04 5.15 5.24 5.30 5.35 5.39 5.41
60 4.77 4.95 5.15 5.37 5.52 5.63 5.72 5.79 5.83
65 4.80 5.00 5.24 5.52 5.83 6.04 6.20 6.31 6.39
70 4.82 5.04 5.30 5.63 6.04 6.49 6.77 6.99 7.15
75 4.84 5.06 5.35 5.72 6.20 6.77 7.45 7.86 8.16
80 4.85 5.08 5.39 5.79 6.31 6.99 7.86 8.84 9.43
85 4.86 5.10 5.41 5.83 6.39 7.15 8.16 9.43 10.86
</TABLE>
29
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
66 2/3% TO THE SURVIVOR
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
AGE OF SECOND ANNUITANT
-----------------------
<TABLE>
<CAPTION>
AGE OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.94 $4.05 $4.18 $4.32 $4.48 $4.66 $4.84 $5.02 $5.19
50 4.05 4.20 4.35 4.51 4.69 4.89 5.09 5.30 5.49
55 4.18 4.35 4.54 4.73 4.95 5.18 5.42 5.65 5.87
60 4.32 4.51 4.73 4.99 5.25 5.53 5.82 6.11 6.37
65 4.48 4.69 4.95 5.25 5.61 5.97 6.33 6.69 7.02
70 4.66 4.89 5.18 5.53 5.97 6.49 6.96 7.43 7.88
75 4.84 5.09 5.42 5.82 6.33 6.96 7.73 8.39 9.02
80 5.02 5.30 5.65 6.11 6.69 7.43 8.39 9.54 10.46
85 5.19 5.49 5.87 6.37 7.02 7.88 9.02 10.46 12.15
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
AGE OF SECOND ANNUITANT
-----------------------
AGE OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
45 $4.87 $4.99 $5.12 $5.27 $5.44 $5.64 $5.86 $6.09 $6.30
50 4.99 5.12 5.26 5.43 5.63 5.85 6.09 6.33 6.57
55 5.12 5.26 5.44 5.63 5.85 6.11 6.38 6.65 6.92
60 5.27 5.43 5.63 5.87 6.14 6.44 6.75 7.07 7.38
65 5.44 5.63 5.85 6.14 6.49 6.84 7.23 7.62 8.00
70 5.64 5.85 6.11 6.44 6.84 7.35 7.84 8.34 8.83
75 5.86 6.09 6.38 6.75 7.23 7.84 8.60 9.28 9.93
80 6.09 6.33 6.65 7.07 7.62 8.34 9.28 10.42 11.35
85 6.30 6.57 6.92 7.38 8.00 8.83 9.93 11.35 13.04
</TABLE>
30
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
50% TO THE SURVIVOR
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
AGE OF SECOND ANNUITANT
-----------------------
<TABLE>
<CAPTION>
AGE OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $4.07 $4.22 $4.40 $4.61 $4.87 $5.17 $5.49 $5.84 $6.18
50 4.22 4.37 4.56 4.79 5.06 5.39 5.75 6.13 6.51
55 4.40 4.56 4.76 5.00 5.31 5.66 6.06 6.49 6.91
60 4.61 4.79 5.00 5.27 5.61 6.01 6.46 6.95 7.43
65 4.87 5.06 5.31 5.61 5.99 6.44 6.96 7.54 8.11
70 5.17 5.39 5.66 6.01 6.44 6.99 7.61 8.29 9.00
75 5.49 5.75 6.06 6.46 6.96 7.61 8.43 9.29 10.17
80 5.84 6.13 6.49 6.95 7.54 8.29 9.29 10.54 11.71
85 6.18 6.51 6.91 7.43 8.11 9.00 10.17 11.71 13.57
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
AGE OF SECOND ANNUITANT
-----------------------
AGE OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
45 $5.01 $5.15 $5.33 $5.56 $5.83 $6.17 $6.55 $6.98 $7.40
50 5.15 5.29 5.48 5.71 6.01 6.36 6.78 7.23 7.68
55 5.33 5.48 5.66 5.91 6.23 6.61 7.05 7.54 8.05
60 5.56 5.71 5.91 6.16 6.51 6.93 7.42 7.96 8.53
65 5.83 6.01 6.23 6.51 6.87 7.34 7.89 8.51 9.16
70 6.17 6.36 6.61 6.93 7.34 7.87 8.51 9.23 10.00
75 6.55 6.78 7.05 7.42 7.89 8.51 9.33 10.20 11.14
80 6.98 7.23 7.54 7.96 8.51 9.23 10.20 11.44 12.64
85 7.40 7.68 8.05 8.53 9.16 10.00 11.14 12.64 14.51
</TABLE>
31
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
100% TO THE SURVIVOR
120 MONTHS MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
AGE OF SECOND ANNUITANT
-----------------------
<TABLE>
<CAPTION>
AGE OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.69 $3.75 $3.80 $3.84 $3.87 $3.89 $3.91 $3.91 $3.92
50 3.75 3.89 3.97 4.04 4.09 4.13 4.15 4.16 4.17
55 3.80 3.97 4.15 4.26 4.35 4.41 4.46 4.48 4.49
60 3.84 4.04 4.26 4.50 4.65 4.76 4.84 4.89 4.91
65 3.87 4.09 4.35 4.65 4.98 5.17 5.31 5.41 5.46
70 3.89 4.13 4.41 4.76 5.17 5.62 5.87 6.05 6.15
75 3.91 4.15 4.46 4.84 5.31 5.87 6.48 6.79 6.98
80 3.91 4.16 4.48 4.89 5.41 6.05 6.79 7.50 7.83
85 3.92 4.17 4.49 4.91 5.46 6.15 6.98 7.83 8.50
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
AGE OF SECOND ANNUITANT
-----------------------
AGE OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
45 $4.63 $4.68 $4.73 $4.77 $4.80 $4.82 $4.84 $4.85 $4.85
50 4.68 4.80 4.88 4.94 4.99 5.03 5.06 5.07 5.08
55 4.73 4.88 5.04 5.14 5.23 5.29 5.34 5.37 5.38
60 4.77 4.94 5.14 5.37 5.51 5.62 5.70 5.75 5.78
65 4.80 4.99 5.23 5.51 5.82 6.00 6.15 6.24 6.30
70 4.82 5.03 5.29 5.62 6.00 6.44 6.68 6.86 6.96
75 4.84 5.06 5.34 5.70 6.15 6.68 7.27 7.57 7.76
80 4.85 5.07 5.37 5.75 6.24 6.86 7.57 8.26 8.58
85 4.85 5.08 5.38 5.78 6.30 6.96 7.76 8.58 9.23
</TABLE>
32
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND 1/2 CONTINGENT LIFE INCOME ANNUITY
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
AGE OF SECOND ANNUITANT
-----------------------
<TABLE>
<CAPTION>
AGE OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.86 $3.89 $3.93 $3.94 $3.96 $3.97 $3.98 $3.98 $3.98
50 4.02 4.10 4.15 4.18 4.21 4.23 4.24 4.25 4.26
55 4.22 4.31 4.42 4.48 4.53 4.57 4.59 4.61 4.61
60 4.43 4.56 4.70 4.84 4.93 4.99 5.04 5.07 5.09
65 4.69 4.84 5.02 5.22 5.42 5.54 5.63 5.69 5.73
70 4.99 5.17 5.39 5.65 5.93 6.23 6.40 6.52 6.60
75 5.33 5.54 5.82 6.14 6.52 6.96 7.40 7.64 7.81
80 5.70 5.96 6.29 6.69 7.17 7.75 8.41 9.08 9.45
85 6.07 6.38 6.75 7.24 7.84 8.59 9.49 10.51 11.50
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
AGE OF SECOND ANNUITANT
-----------------------
AGE OF
ANNUITANT 45 50 55 60 65 70 75 80 85
- --------- -- -- -- -- -- -- -- -- --
45 $4.80 $4.83 $4.86 $4.88 $4.89 $4.90 $4.91 $4.92 $4.92
50 4.95 5.02 5.06 5.10 5.13 5.15 5.16 5.17 5.18
55 5.14 5.23 5.32 5.38 5.43 5.46 5.49 5.51 5.52
60 5.36 5.47 5.59 5.72 5.80 5.86 5.91 5.95 5.97
65 5.63 5.77 5.93 6.10 6.29 6.41 6.50 6.56 6.60
70 5.96 6.12 6.31 6.54 6.81 7.08 7.25 7.37 7.46
75 6.35 6.54 6.77 7.06 7.42 7.81 8.25 8.49 8.66
80 6.79 7.01 7.30 7.66 8.11 8.65 9.28 9.93 10.29
85 7.26 7.53 7.86 8.29 8.85 9.55 10.41 11.39 12.37
</TABLE>
These Annuity rates are based on mortality from 1983 Table a.
33
GTRP-IA (XC)
<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. MAINTENANCE FEE: The Maintenance Fee will be $15 per Individual Account.
However, for a Separate Individual Account maintained pursuant to a lump-
sum payment, the Maintenance Fee will be $0.
5.02. SURRENDER FEE:
For each surrender from an Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for the
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by the Participant. A Purchase
Payment Cycle is completed when this number and amount of Purchase
Payments have been made. The number of Purchase Payment Cycles completed
may not be greater than the number of whole years since the Individual
Account was established. For each surrender, the Fee will be as follows:
NUMBER OF PURCHASE PAYMENT CYCLES COMPLETED SURRENDER FEE
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
IF PERIOD OF TIME IS SURRENDER FEE
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual
Accounts is $2,500 or less;
34
<PAGE>
(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The
Contract Holder must submit documentation satisfactory to Aetna to
confirm that the Participant is no longer providing services to the
employer.
35
<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. MAINTENANCE FEE: The Maintenance Fee will be $12.50 per Individual
Account. However, for a Separate Individual Account maintained pursuant
to a lump-sum payment, the Maintenance Fee will be $0.
5.02. SURRENDER FEE:
For each surrender from an Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for the
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by the Participant. A Purchase
Payment Cycle is completed when this number and amount of Purchase
Payments have been made. The number of Purchase Payment Cycles completed
may not be greater than the number of whole years since the Individual
Account was established. For each surrender, the Fee will be as follows:
NUMBER OF PURCHASE PAYMENT CYCLES COMPLETED SURRENDER FEE
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
IF PERIOD OF TIME IS SURRENDER FEE
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual
Accounts is $2,500 or less;
34
<PAGE>
(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The
Contract Holder must submit documentation satisfactory to Aetna to
confirm that the Participant is no longer providing services to the
employer.
35
<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. MAINTENANCE FEE: The Maintenance Fee will be $10 per Individual Account.
However, for a Separate Individual Account maintained pursuant to a lump-
sum payment, the Maintenance Fee will be $0.
5.02. SURRENDER FEE:
For each surrender from an Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for the
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by the Participant. A Purchase
Payment Cycle is completed when this number and amount of Purchase
Payments have been made. The number of Purchase Payment Cycles completed
may not be greater than the number of whole years since the Individual
Account was established. For each surrender, the Fee will be as follows:
NUMBER OF PURCHASE PAYMENT CYCLES COMPLETED SURRENDER FEE
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
IF PERIOD OF TIME IS SURRENDER FEE
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual
Accounts is $2,500 or less;
34
<PAGE>
(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The
Contract Holder must submit documentation satisfactory to Aetna to
confirm that the Participant is no longer providing services to the
employer.
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V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. MAINTENANCE FEE: The Maintenance Fee will be $7.50 per Individual
Account. However, for a Separate Individual Account maintained pursuant
to a lump-sum payment, the Maintenance Fee will be $0.
5.02. SURRENDER FEE:
For each surrender from an Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for the
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by the Participant. A Purchase
Payment Cycle is completed when this number and amount of Purchase
Payments have been made. The number of Purchase Payment Cycles completed
may not be greater than the number of whole years since the Individual
Account was established. For each surrender, the Fee will be as follows:
NUMBER OF PURCHASE PAYMENT CYCLES COMPLETED SURRENDER FEE
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
IF PERIOD OF TIME IS SURRENDER FEE
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual
Accounts is $2,500 or less;
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(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The
Contract Holder must submit documentation satisfactory to Aetna to
confirm that the Participant is no longer providing services to the
employer.
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<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. Maintenance Fee: The Maintenance Fee will be $5 per Individual Account.
However, for a Separate Individual Account maintained pursuant to a
lump-sum payment, the Maintenance Fee will be $0.
5.02. Surrender Fee: For each surrender from an Individual Account, the
Surrender Fee will vary according to the number of Purchase Payment
Cycles completed for the Individual Account being surrendered. The
number and amount of Purchase Payments to be made in a year is chosen by
the Participant. A Purchase Payment Cycle is completed when this number
and amount of Purchase Payments have been made. The number of Purchase
Payment Cycles completed may not be greater than the number of whole
years since the Individual Account was established. For each surrender,
the Fee will be as follows:
Number of Purchase Payment Cycles Completed Surrender Fee
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
If Period of Time is Surrender Fee
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual
Accounts is $2,500 or less;
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<PAGE>
(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The
Contract Holder must submit documentation satisfactory to Aetna to
confirm that the Participant is no longer providing services to the
employer.
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<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
RETIREMENT PLUS
5.01. Maintenance Fee: The Maintenance Fee will be $2.50 per Individual
Account. However, for a Separate Individual Account maintained pursuant
to a lump-sum payment, the Maintenance Fee will be $0.
5.02. Surrender Fee: For each surrender from an Individual Account, the
Surrender Fee will vary according to the number of Purchase Payment
Cycles completed for the Individual Account being surrendered. The
number and amount of Purchase Payments to be made in a year is chosen by
the Participant. A Purchase Payment Cycle is completed when this number
and amount of Purchase Payments have been made. The number of Purchase
Payment Cycles completed may not be greater than the number of whole
years since the Individual Account was established. For each surrender,
the Fee will be as follows:
Number of Purchase Payment Cycles Completed Surrender Fee
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%
For each surrender from an Individual Account maintained pursuant to a
lump-sum payment, the Surrender Fee will vary according to the period of
time between the Effective Date of the Individual Account and the date of
surrender as follows:
If Period of Time is Surrender Fee
Less than 5 years 5%
From 5 to 6 years 4%
From 6 to 7 years 3%
From 7 to 8 years 2%
From 8 to 9 years 1%
9 or more years 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59 1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) On and after the tenth anniversary of the Effective Date of the
Individual Account;
(e) When the Individual Account Current Value is $2,500 or less and no
surrenders have been taken from the Individual Account within the
prior 12 months. If there is no more than one Individual Account
under the Contract for a Participant, then this provision will only
apply when the total in all of the Participant's Individual
Accounts is $2,500 or less;
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<PAGE>
(f) In an amount equal to or less than 10% of the current Individual
Account Current Value, as part of the first partial surrender
request in a calendar year to a Participant who is at least age 59
1/2 and less than age 70 1/2. The Individual Account Current Value
is calculated as of the date the partial surrender request is
received in good order at Aetna's Home Office. Any outstanding
loans from the Participant's Individual Account are excluded when
calculating its Individual Account Current Value. This provision
does not apply to partial surrenders due to loan defaults made from
Individual Account Current Values and does not apply to full
surrender requests;
(g) To relieve a Participant's "financial hardship," as may be allowed
for annuity contracts under Section 403(b) of the Internal Revenue
Code or other appropriate Internal Revenue service sources; or
(h) On account of a Participant's separation from service. The
Contract Holder must submit documentation satisfactory to Aetna to
confirm that the Participant is no longer providing services to the
employer.
<PAGE>
AMENDED AND RESTATED
FUND PARTICIPATION AGREEMENT
Aetna Life Insurance and Annuity Company (the "Company") and Alger American
Fund ("Alger") and its investment adviser, Fred Alger Management, Inc. ("Alger
Management") hereby agree to an arrangement whereby all the Portfolios of Alger
American Fund, including but not limited to Alger American Small Capitalization
Portfolio, Alger American Growth Portfolio, Alger American Balanced Portfolio,
Alger American Income & Growth Portfolio, Alger American MidCap Growth Portfolio
and Alger American Leveraged AllCap Portfolio (the "Fund") shall be made
available to serve as underlying investment media for Variable Annuity or
Variable Life Contracts ("Contracts") to be issued by the Company. This
Agreement amends and restates the prior Fund Participation Agreement between the
parties dated as of September 1, 1993.
1. ESTABLISHMENT OF ACCOUNTS; AVAILABILITY OF FUNDS.
(a) The Company represents that it has established Variable Annuity
accounts B, C, D and Variable Life Account B and may establish such
other accounts as may be set forth in Schedule A attached hereto and
as may be amended from time to time (the "Accounts"), each of which is
a separate account under Connecticut Insurance law, and has registered
or will register each of the Accounts (except for such Accounts for
which no such registration is required) as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"), to serve as
an investment vehicle for the Contracts. Each Contract provides for
the allocation of net amounts received by the Company to an Account
for investment in the shares of one of more specified open-end
investment ("Funds") available through that Account as underlying
investment media. Selection of a particular Fund and changes therein
from time to time are made by the participant or Contract owner, as
applicable under a particular Contract.
(b) Alger and Alger Management represent and warrant that the investments
of the Fund will at all times be adequately diversified within the
meaning of Section 817(h) of the Internal Revenue Service Code of 1986,
as amended (the "Code"), and the Regulations thereunder, and that at
all times while this agreement is in effect, all beneficial interests
will be owned by one or more insurance companies or by any other party
permitted under Section 1.817-5(f)(3) of the Regulations promulgated
under the Code.
2. MARKETING AND PROMOTION.
The Company agrees to make every reasonable effort to market its Contracts,
whether directly or through its affiliates. It will use its best efforts to
cause equal emphasis and promotion to be given to shares of the Fund relative to
other Funds available through the Accounts. In marketing and administering its
Contracts, the Company and its affiliates will comply with all applicable State
and Federal laws.
<PAGE>
3. PRICING INFORMATION; ORDERS; SETTLEMENT.
(a) Alger will make shares available to be purchased by the Company, and
will accept redemption orders from the Company, on behalf of each
Account at the net asset value applicable to each order. Fund shares
shall be purchased and redeemed in such quantity and at such time
determined by the Company to be necessary to meet the requirements of
those Contracts for which the Funds serve as underlying investment
media.
(b) Alger will provide to the Company closing net asset value, dividend
and capital gain information at the close of trading each day that the
New York Stock Exchange (the "Exchange") is open (each such day, a
"business day"), and in no event later than 7:00 p.m. Eastern time on
such business day. Alger shall be liable to the Company for the costs
incurred in making a Contract owner's or a participant's account whole
if such costs are a result of Alger's failure to provide timely or
correct net asset values. The Company will send via facsimile
transmission to Alger or its specified agent orders to purchase and/or
redeem Fund shares by 10:00 a.m. Eastern Time the following business
day. Payment for net purchases will be wired by the Company to a
custodial account designated by Alger to coincide with the order for
shares of the Fund.
(c) Alger hereby appoints the Company as its agent for the limited purpose
of accepting purchase and redemption orders for Fund shares relating to
the Contracts from Contract owners or participants. Orders from
Contract owners or participants received from any distributor of the
Contracts (including Aetna Investment Services, Inc., an affiliate of
the Company) by the Company, acting as agent for Alger, prior to the
close of the Exchange on any given business day will be executed by
Alger at the net asset value determined as of the close of the Exchange
on such business day. Any orders received by the Company acting as
agent on such day but after the close of the Exchange will be executed
by Alger at the net asset value determined as of the close of the
Exchange on the next business day following the day of receipt of such
order.
(d) Payments for net redemptions of shares of the Funds will be wired by
Alger from the Alger custodial account to an account designated by the
Company.
(e) Each party has the right to rely on information or confirmations
provided by the other party (or by any affiliate of the other party),
and shall not be liable in the event that an error is a result of any
misinformation supplied by the other party. If a mistake is caused in
supplying such information or confirmations, which results in a
reconciliation with incorrect information, the amount required to make
a Contract owner's or a Participant's account whole shall be borne by
the party providing the incorrect information.
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<PAGE>
4. EXPENSES.
(a) Except as otherwise provided in this Agreement, all expenses incident
to the performance by Alger under this Agreement shall be paid by
Alger, including the cost of registration of Alger shares with the
Securities and Exchange Commission (the "SEC") and in states where
required.
(b) Alger shall distribute to the Company its proxy material, periodic
fund reports to shareholders and other material that are required by
law to be sent to Contract owners. In addition, Alger shall provide
the Company with a sufficient quantity of its prospectuses to be used
in connection with the offerings and transactions contemplated by this
Agreement. Subject to subsection (c) below, the cost of preparing and
printing such materials shall be paid by Alger, and the cost of
distributing such material shall be paid by the Company.
(c) In lieu of Alger's providing printed copies of prospectuses and
periodic fund reports to shareholders, the Company shall have the right
to request that Alger provide a copy of such materials in an electronic
format, which the Company may use to have such materials printed
together with similar materials of other Account funding media that the
Company or any distributor will distribute to existing or prospective
Contract owners or participants. In that event Alger shall reimburse
the Company for the same proportion of the total printing expense for
such materials as the number of pages in each such printed document
provided by Alger bears to the total number of pages in such printed
document.
5. REPRESENTATIONS.
The Company agrees that it and its agents shall not, without the written
consent of Alger, make representations concerning Alger or its shares except
those contained in the then current prospectuses and in current printed sales
literature of Alger.
6. ADMINISTRATION OF ACCOUNTS.
(a) Administrative services to Contract owners and participants shall be
the responsibility of the Company and shall not be the responsibility
of Alger or Alger Management. Alger Management recognizes the Company
as the sole shareholder of Alger shares issued under this Agreement,
and that substantial savings will be derived in administrative
expenses, such as significant reductions in postage expense and
shareholder communications, by virtue of having a sole shareholder for
each of the Accounts rather than multiple shareholders. In
consideration of the savings resulting from such arrangement, and to
compensate the Company for its costs, Alger Management agrees to pay to
the Company an amount equal to 20 basis points (0.20%) per annum of the
average aggregate amount invested by the Company in the Fund under this
Agreement.
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<PAGE>
(b) The parties agree that Alger Management's payments to the Company are
for administrative services only and do not constitute payment in any
manner for investment advisory services or for costs of distribution.
(c) For the purposes of computing the administrative fee reimbursement
contemplated by this Section 6, the average aggregate amount invested
by the Company over a one month period shall be computed by totaling
the Company's aggregate investment (share net asset value multiplied by
total number of shares held by the Company) on each business day during
the month and dividing by the total number of business days during each
month.
(d) Alger will calculate the reimbursement of administrative expenses at
the end of each calendar quarter and will make such reimbursement to
the Company within 30 days thereafter. The reimbursement check will be
accompanied by a statement showing the calculation of the monthly
amounts payable by Alger Management and such other supporting data as
may be reasonably requested by the Company.
7. TERMINATION.
This agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company or Alger, upon three months
advance written notice to the other;
(b) at the option of the Company, upon one week advance written notice to
Alger, if Alger shares are not available for any reason to meet the
requirement of Contracts as determined by the Company. Reasonable
advance notice of election to terminate shall be furnished by Company;
(c) at the option of either the Company or Alger, immediately upon
institution of formal proceedings against the broker-dealer or
broker-dealers marketing the Contracts, the Account, the Company,
Alger or Alger Management by the National Association of Securities
Dealers, Inc. (the "NASD"), the SEC or any other regulatory body;
(d) upon the requisite vote of Contract owners or participants having an
interest in the Fund, to substitute for the Fund's shares the shares of
another investment company in accordance with the terms of the
applicable Contracts. The Company will give 60 days written notice to
Alger of any proposed vote to replace the Funds' shares;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(f) if Fund shares are not registered, issued or sold in conformance with
Federal law or such law precludes the use of Fund shares as an
underlying investment medium for Contracts issued or to be issued by
the Company. Prompt notice shall be given by either party should such
situation occur.
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<PAGE>
8. CONTINUATION OF AGREEMENT.
Termination as the result of any cause listed in Section 7 shall not affect
Alger's obligation to furnish its shares to Contracts then in force for which
its shares serve or may serve as the underlying medium unless such further sale
of Fund shares is proscribed by law or the SEC or other regulatory body.
9. ADVERTISING MATERIALS; FILED DOCUMENTS.
(a) Advertising and sales literature with respect to the Fund prepared by
the Company or its agents for use in marketing its Contracts will be
submitted to Alger for review before such material is submitted to any
regulatory body for review.
(b) Alger will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements and all
amendments or supplements to any of the above that relate to the Fund
promptly after the filing of such document with the SEC or other
regulatory authorities. The Company will provide to Alger at least one
complete copy of all registration statements, prospectuses, statements
of additional information, annual and semi-annual reports, proxy
statements, and all amendments or supplements to any of the above that
relate to the Account promptly after the filing of such document with
the SEC or other regulatory authority.
10. PROXY VOTING.
(a) The Company shall provide pass-through voting privileges on Fund
shares held by registered separate accounts to all Contract owners and
participants to the extent the SEC continues to interpret the 1940 Act
as requiring such privileges. The Company shall provide pass-through
voting privileges on Fund shares held by unregistered separate accounts
to all Contract owners.
(b) The Company will distribute to Contract owners and participants, as
appropriate, all proxy material furnished by Alger and will vote Fund
shares in accordance with instructions received from such Contract
owners and participants. If and to the extent required by law, the
Company, with respect to each group Contract and in each Account, shall
vote Fund shares for which no instructions have been received in the
same proportion as shares for which such instructions have been
received. The Company and its agents shall not oppose or interfere
with the solicitation of proxies for Fund shares held for such Contract
owners and participants.
11. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless Alger and each of
its directors, officers, employees, agents and each person, if any, who
controls the Fund or its investment adviser within the meaning of the
Securities Act of 1933 (the "1933 Act") against any losses, claims,
damages or liabilities to which the Fund or any such director, officer,
employee, agent, or controlling person may become subject, under
5
<PAGE>
the 1933 Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, prospectus or sales
literature of the Company, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or arise out of or as a result of conduct,
statements or representations (other than statements or representations
contained in the prospectuses or sales literature of the Fund) of the
Company or its agents, with respect to the sale and distribution of
Contracts for which Fund shares are the underlying investment. The
Company will reimburse any legal or other expenses reasonably
incurred by the Fund or any such director, officer, employee,
agent, investment adviser, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability
or action; PROVIDED, HOWEVER, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or
omission or alleged omission made in such Registration Statement or
prospectus in conformity with written materials furnished to the
Company by the Fund specifically for use therein. This indemnity
agreement will be in addition to any liability which Company may
otherwise have.
(b) Alger and Alger Management agrees to indemnify and hold harmless
the Company and its directors, officers, employees, agents and each
person, if any, who controls the Company within the meaning of the
1933 Act against any losses, claims, damages or liabilities to which
the Company or any such director, officer, employee, agent or
controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectuses or sales
literature of the Fund or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or material fact required to be stated
therein or necessary to make the statements therein not misleading.
Alger will reimburse any legal or other expenses reasonably incurred
by the Company or any such director, officer, employee, agent, or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that Alger will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based
upon Registration Statement or prospectuses which are in conformity
with written materials furnished to Alger by the Company
specifically for use therein. This indemnity agreement will be in
addition to any liability which Alger or Alger Management may
otherwise have.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 11. In case any
such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
6
<PAGE>
indemnifying party will be entitled to participate therein and, to the
extent that it may wish to, assume the defense thereof, with ounsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election to
assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 11 for any legal
or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
12. POTENTIAL CONFLICTS.
(a) The Company has received a copy of an application for exemptive relief,
as amended, filed by Alger on December 30, 1988 with the SEC and the
order issued by the SEC in response thereto (the "Shared Funding
Exemptive Order"). The Company has reviewed the conditions to the
requested relief set forth in such application for exemptive relief.
As set forth in such application, the Board of Directors of Fund
(the "Board") will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the
contractholders of all separate accounts ("Participating Companies")
investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (i) an action by any
state insurance regulatory authority; (ii) a change in applicable
federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar actions by insurance, tax or
securities regulatory authorities; (iii) an administrative or
judicial decision in any relevant proceeding; (iv) the manner in
which the investments of any portfolio are being managed; (v) a
difference in voting instructions given by variable annuity
contractholders and variable life insurance contractholders; or (vi)
a decision by an insurer to disregard the voting instructions of
contractholders. The Board shall promptly inform the Company if it
determines that an irreconcilable material conflict exists and the
implications thereof.
(b) The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in
carrying out its responsibilities under the Shared Funding
Exemptive Order by providing the Board with all information
reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Company
to inform the Board whenever contractholder voting instructions are
disregarded.
(c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists
with regard to contractholder investments in a Fund, the Board
shall give prompt notice to all Participating Companies. If the
Board determines that the Company is responsible for causing or
creating said conflict, the Company shall at its sole cost and
expense, and to the extent reasonably practicable (as determined by
a majority of the disinterested Board members), take such action as
is necessary to remedy or eliminate the irreconcilable material
conflict. Such necessary action may include but shall not be
limited to:
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<PAGE>
(i) withdrawing the assets allocable to the Account from the Fund and
reinvesting such assets in a different investment medium or
submitting the question of whether such segregation should be
implemented to a vote of all affected contractholders and as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable
contract owners of one or more Participating Companies) that votes
in favor of such segregation, or offering to the affected
contractholders the option of making such a change; and/or
(ii) establishing a new registered management investment company
or managed separate account.
(d) If a material irreconcilable conflict arises as a result of a decision
by the Company to disregard its contractholder voting instructions and
said decision represents a minority position or would preclude a
majority vote by all of its contractholders having an interest in
the Fund, the Company at its sole cost, may be required, at the
Board's election, to withdraw an Account's investment in the Fund
and terminate this Agreement; provided, however, that such
withdrawal and termination shall be limited to the extent required
by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board.
(e) For the purpose of this Section 12, a majority of the disinterested
Board members shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no
event will Alger be required to establish a new funding medium for
any Contract. The Company shall not be required by this Section 12
to establish a new funding medium for any Contract if an offer to do
so has been declined by vote of a majority of the Contract owners or
participants materially adversely affected by the irreconcilable
material conflict.
13. MISCELLANEOUS.
(a) AMENDMENT AND WAIVER. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally, but
only by an instrument in writing signed by all parties hereto.
(b) NOTICES. All notices and other communications hereunder shall be
given or made in writing and shall be delivered personally, or sent by
telex, telecopier or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are
directed at the following addresses, or at such other addresses as
may be designated by notice from such party to all other parties.
To the Company:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Julie E. Rockmore, Counsel
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<PAGE>
To Alger American Fund or Fred Alger Management, Inc.:
Alger American Fund
75 Maiden Lane
New York, NY 10038
Attention: Gregory S. Duch
Any notice, demand or other communication given in a manner prescribed in
this subsection
(b) shall be deemed to have been delivered on receipt.
(c) SUCCESSORS AND ASSIGNS. This agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by
signing any such counterpart.
(e) SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby.
(f) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto and supersedes all prior
agreement and understandings relating to the subject matter hereof.
(g) GOVERNING LAW. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Connecticut.
14. LIMITATION ON LIABILITY OF TRUSTEES, ETC.
This agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund. The obligations
of this Agreement shall be binding upon the assets and property of the Fund only
and shall not be binding upon any trustee, officer or shareholder of the fund
individually.
15. PREVIOUS AGREEMENTS.
(a) This Agreement amends and restates the Fund Participation
Agreement dated as of September 1, 1993 between the Company, Alger
and Alger Management; and
(b) This Agreement hereby terminates the Service Agreement dated as
of September 1, 1993 between the Company, Alger and Alger
Shareholder Services, Inc.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers effective as of the 31st day of March, 1995.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /S/ SHAUN P. MATHEWS
----------------------
Name: Shaun P. Mathews
Title: Sr. Vice President
ALGER AMERICAN FUND
By: /S/ GREGORY S. DUCH
-------------------
Name: Gregory S. Duch
Title:
FRED ALGER MANAGEMENT, INC.
By: /S/ GREGORY S. DUCH
-------------------
Name: Gregory S. Duch
Title:
Alger Shareholder Services, Inc. hereby executes this Agreement with respect to
paragraph 15(b)of this Agreement only.
ALGER SHAREHOLDER SERVICES, INC.
By: /S/ GREGORY S. DUCH
-------------------
Name: Gregory S. Duch
Title:
10
<PAGE>
A G R E E M E N T
THIS AGREEMENT made by CALVERT ASSET MANAGEMENT COMPANY, INC. ("CALVERT"),
with principal offices at 4550 Montgomery Avenue, Bethesda, Maryland, and AETNA
LIFE INSURANCE AND ANNUITY COMPANY ("AETNA"), a life insurance company organized
under the laws of the State of Connecticut, relating to the CALVERT Socially
Responsible SERIES ("SERIES") of the Acacia Capital Corporation ("FUND"), a
Maryland corporation, is as follows:
WHEREAS, FUND is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 ("1940 Act") as an open-end
management investment company and its securities are registered under the
Securities Act of 1933 ("1933 Act");
WHEREAS, FUND is to be used solely as a funding vehicle for variable life
and variable annuity insurance contracts offered by life insurance companies
through separate accounts of such life insurance companies; and
WHEREAS, AETNA has established Aetna Life Insurance and Annuity Company
Variable Annuity Account C, a separate account, and other separate accounts to
offer variable annuity and variable life contracts and is desirous of having
FUND serve as one of the funding vehicles for one or more such variable
contracts;
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained, it is agreed by and between CALVERT and AETNA as follows:
1. CALVERT shall take all steps necessary to maintain the registration of
FUND with the SEC and any states where such registration may be required. Such
registrations shall include a separate prospectus for the SERIES which does not
reference the other seven series of the FUND. CALVERT shall provide the
necessary officers and directors of FUND. CALVERT shall pay all costs and
expenses of organization and registration, but may be reimbursed by FUND for
such expenses as permitted under applicable securities laws.
2. (a) CALVERT shall act as investment adviser to FUND for an annual
fee, as specified in the FUND's investment advisory agreement.
Currently the maximum is 0.70% of the first $500 million of the
average daily net assets of the SERIES.
(b) During the years of 1989 and 1990 AETNA will pay the cost of
printing prospectuses and sales material it uses to promote the
sale of SERIES. Beginning January 1, 1991, CALVERT shall pay the
cost of: typesetting and printing SERIES prospectuses distributed
by AETNA to prospective purchasers, the portion of any sales
material used by AETNA to promote
<PAGE>
the sale of SERIES, and a pro rata portion of any generic sales
material distributed for the purpose of enrolling participants in
Internal Revenue Code (IRC) 403(b) and 457 plans sold by AETNA in
which SERIES is offered in conjunction with other investment
options. AETNA will provide CALVERT an opportunity to review and
comment on such material prior to distribution. AETNA will
reimburse CALVERT for any such printing costs it may pay during
any calendar year which are in excess of 0.15% of SERIES net
assets owned by AETNA separate accounts on December 31, of that
year. AETNA will pay any reimbursement due CALVERT within thirty
(30) days' of the end of each calendar year. If during a year it
becomes apparent that such printing costs will exceed the amount
payable by CALVERT for the year, AETNA will pay the amount in
excess of what could reasonable by expected to be payable by
CALVERT.
(c) AETNA agrees that all SERIES shares purchased under this
agreement will be made by AETNA variable annuity separate
accounts. Calvert agrees it will not allow FUND or SERIES shares
to be purchased by any entity other than by insurance company
variable annuity or variable life separate accounts.
(d) CALVERT will promptly provide AETNA with copies of the minutes of
all proceedings of the Board of Directors of FUND, or any
committee thereof, together with all agreements relating to
SERIES presented at such meetings. CALVERT may delete
confidential information concerning Acacia Mutual Life Insurance
Company, CALVERT, or any other company. CALVERT shall not
unreasonably withhold information needed by AETNA to evaluate and
carry out its responsibilities to its customers.
(e) CALVERT will promptly provide AETNA with copies of all filings
made with the SEC pertaining to SERIES.
(f) AETNA will promptly provide CALVERT with copies of all filings
made with the SEC pertaining to separate accounts for which the
SERIES serves as a funding vehicle.
3. SERIES will make its shares available at net asset value to the
separate account(s) designated by AETNA.
4. CALVERT will provide AETNA written notice within ten business days
after signing any agreement to make the SERIES available to Third Party
Administrators or other insurance companies to be sold to participants in IRC
403(b) or 457 plans.
<PAGE>
5. AETNA will provide CALVERT written notice within ten business days of
signing agreements to offer mutual funds, not managed by AETNA affiliated
investment advisers, as investment options under variable annuity contracts sold
to IRC 403(b) or IRC 457 plans.
6. Orders for shares of SERIES shall be placed with the FUND pursuant to
procedures which are then in effect and which may be modified from time to time.
FUND will provide AETNA with documentation of all procedures in effect when the
offer and sale of SERIES shares is to commence and will inform AETNA of any
modifications to such procedures.
7. CALVERT will diversify SERIES' investments in accordance with the
provisions of Section 817(h) of the IRC as amended, and the regulations
thereunder as they apply to variable contracts.
8. (a) AETNA shall cause the contracts funded by SERIES shares to be
registered with the SEC under the 1933 Act and the separate
account(s) to be registered with the SEC as unit investment
trust(s) under the 1940 Act to the extent required by these laws,
and shall file such documents and take such other action as
needed in order to comply with all requirements of the applicable
insurance laws in connection with the use of SERIES shares as
funding vehicles. AETNA will bear all of the costs associated
with these functions.
(b AETNA will bear the costs of, and will be responsible for,
developing policy, application, confirmations and administrative
forms and filing such of these forms as is necessary to comply
with the requirements of all insurance laws and regulations in
each state in which the contracts are offered.
(c) AETNA will be responsible for and bear the expense of all
separate and participant account administration including all
contract holder and participant service and communications except
for prospectuses and sales material as described in 2.(b) and
legally required items paid for by registered investment
companies such as FUND or SERIES proxies, annual and semiannual
reports. AETNA will make a good faith effort to prevent waste
and to keep the cost of items paid for by Calvert, FUND or SERIES
low.
(d) AETNA will reimburse the FUND for a pro rata share of the cost of
obtaining a separate audit opinion for SERIES distinct from the
FUND's or other seven series. AETNA's share of this expense will
be in direct proportion to the percentage of SERIES assets held
in AETNA separate accounts.
<PAGE>
9. (a) CALVERT will comply with all applicable state and federal laws in
all its efforts to encourage the sale of SERIES by AETNA and its
representatives.
(b) AETNA will, under this Agreement, offer IRC 403(b) Tax Deferred
Annuities contracts that include SERIES shares as an investment
option to public school systems and universities located in the
state of New York that have employees represented by the New York
State United Teachers (NYSUT) or its affiliates. AETNA may,
under this agreement, elect to offer SERIES shares to other IRC
403(b) or 457 variable annuity customers or prospects.
(c) In marketing its contracts, AETNA will comply with all applicable
state and federal laws. AETNA and its agents shall make no
representations or warranties concerning the FUND or SERIES
except those contained in the then current prospectuses of the
FUND or SERIES or in sales material approved by both AETNA and
CALVERT.
(d) Any materials used by AETNA which describe SERIES, its shares, or
CALVERT shall be submitted to CALVERT for approval prior to use.
AETNA shall file, to the extent required by law, any such
materials with the National Association of Securities Dealers,
Inc.
(e) AETNA will provide participants with full and fair disclosure
concerning the various investment options offered under the
variable contract. AETNA agrees to pay its agents and employees
the same compensation for participant investments made in SERIES
as it does for money placed in any of the other investment
options, including AETNA managed options.
(f) CALVERT will not initiate any contact in regard to SERIES or FUND
with AETNA contract holders. In the event AETNA participants or
contract owners contact CALVERT for information about SERIES,
CALVERT may provide general information only and will refer the
customer to AETNA for specific account or contract information.
10. Aetna shall report to the FUND's Board of Directors any known
potential or existing conflicts among the interests of the contract holders of
the separate accounts investing in the FUND, and provide any information
possessed by AETNA concerning the conflict to the board for their consideration.
11. (a) AETNA shall be solely responsible for its actions in connection
with its use of SERIES and its shares and shall indemnify and
hold harmless FUND, CALVERT and their officers, and directors
from any liability,
<PAGE>
including reasonable attorneys' fees, for AETNA'S negligent or
wrongful acts or failures to act with respect to its use of FUND
or SERIES shares.
(b) CALVERT shall be solely responsible for its actions in connection
with its management of FUND and shall indemnify and hold harmless
AETNA, its officers and directors from any liability, including
reasonable attorneys' fees, for CALVERT'S negligent or wrongful
acts or failures to act with respect to its management of FUND.
12. (a) If, after a presentation on the issue by AETNA, the Board of
Directors of FUND, or a majority of its disinterested Directors,
determines that a material irreconcilable conflict exists, making
it not in the best interest of FUND to continue to sell shares to
AETNA, AETNA shall, at its own expense, take whatever steps are
necessary to remedy or eliminate the conflict, which steps may
include, but are not limited to:
(1) withdrawing the assets allocable to the separate account(s)
of AETNA from SERIES and reinvesting such assets in a
different investment medium managed by CALVERT, or
submitting to a vote of all affected contract holders the
questions of whether (I) withdrawal of assets from SERIES or
(ii) segregation of assets should be implemented and, as
appropriate, withdrawing or segregating the assets of any
particular group that votes in favor of such withdrawal or
segregation, or offering to the affected contract holders
the option of making such a change;
(2) establishing a new registered open-end management investment
company or separate account managed by CALVERT.
(3) AETNA may take any action consistent with the Separate
Account prospectus.
(b) For purposes hereof, the Board of Directors, including a majority
of the disinterested Directors, shall determine after further
discussion with AETNA whether or not any proposed action
adequately remedies any material irreconcilable conflict. In no
event will either CALVERT OR AETNA be required to establish a new
funding medium for any variable contracts.
(c) CALVERT will promptly make known to AETNA the Board of Directors'
consideration or determination of the existence of a material
irreconcilable conflict and its implications.
13. AETNA will not oppose, or encourage its agents or clients to oppose,
the voting recommendations from CALVERT or the Board of Directors and will
facilitate the
<PAGE>
solicitation of proxies from AETNA contract holders or participants with
investments in SERIES. AETNA agrees to provide pass-through voting privileges
to all AETNA contract holders and participants who have SERIES proxy voting
rights and to insure that each of its separate accounts participating in SERIES
calculates voting privileges in a manner consistent with instructions received
from FUND. CALVERT will provide AETNA and all other insurance companies uniform
instructions to insure all companies calculate voting privileges in a manner
consistent with then current federal and state regulations. CALVERT or the FUND
will reimburse AETNA for any reasonable expenses it may incur supporting the
proxy distribution process including the cost of printing, mailing, tabulating
and reporting proxy voting results.
14. This Agreement shall terminate automatically in the event of its
assignment.
15. This Agreement may be terminated at any time upon sixty (60) days'
written notice to the other party hereto, without the payment of any penalty.
Such termination shall not affect or modify the obligations of the parties set
forth herein with respect to any events occurring prior to such termination.
CALVERT will not be required, under section 2(b) of this agreement, to pay for
invoices which are received by CALVERT after the effective date of termination
or for sales or promotional material printed after notice of termination is
given by either CALVERT or AETNA.
16. This Agreement shall be subject to the provisions of the 1940 Act and
the rules and regulations thereunder, including any exemptive relief therefrom
and the orders of the SEC setting forth such relief.
17. This Agreement is the complete and exclusive statement of the
agreement between the parties as to the subject matter hereof which supersedes
all proposals or agreements, oral or written, and all other communications
between the parties related to the subject matter of this Agreement.
18. This Agreement can only be modified by a written agreement duly signed
by the persons authorized to sign agreements on behalf of the respective party.
19. Any controversy relating to this Agreement shall be determined by
arbitration in Philadelphia, Pennsylvania in accordance with the Commercial
Arbitration rules of the American Arbitration Association using arbitrators who
will follow substantive rules of law. The dispute shall be determined by an
arbitrator acceptable to both parties who shall be selected within seven (7)
days of filing of notices of intention to arbitrate. Otherwise, the dispute
shall be determined by a panel of three arbitrators selected as follows: Within
seven (7) days of filing notice of intention to arbitrate, each party will
appoint one arbitrator. These two arbitrators will then name a third
arbitrator, who shall be an attorney admitted before the bar of any state of the
United States, to preside over the panel. If either party fails to appoint an
arbitrator, or if the two arbitrators do not name a third arbitrator within
seven (7) days, either party may request the American Arbitration Association to
appoint the necessary arbitrator(s) pursuant to Rule 13 of the Commercial
<PAGE>
Arbitration Rules. Each party will pay its own cost and expenses. All
testimony shall be transcribed. The award of the panel shall be accompanied by
findings of fact and a statement of reasons for the decision. All parties agree
to be bound by the results of this arbitration; judgment upon the award so
rendered may be entered and enforced in any court of competent jurisdiction. To
the extent reasonably practicable, both parties agree to continue performing
their respective obligations under this Agreement while the dispute is being
resolved. All matters relating to such arbitration shall be maintained in
confidence.
20. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Connecticut.
21. All notices which are required to be given or submitted pursuant to
this Agreement shall be in writing and shall be sent by registered or certified
mail, return receipt requested, to the addresses set forth below:
George N. Gingold RE4C Stephen W. Topp, Esquire
Corporate Secretary Secretary
Aetna Life Insurance and Annuity Company Calvert Asset Management Company
151 Farmington Avenue 4550 Montgomery Avenue
Hartford, CT 06156 Suite 1000 N
Bethesda, MD 20814
This Agreement can be signed in one or more duplicate originals.
Executed this 13th day of March, 1989.
CALVERT ASSET MANAGEMENT COMPANY, INC.
ATTEST: /s/ BY /s/
-------------------------- -----------------------
Vice President
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
ATTEST: /s/ BY /s/ Thomas West
-------------------------- -----------------------
<PAGE>
FIRST AMENDMENT TO AGREEMENT
This First Amendment, executed as of the 27th day of December, 1993 is by and
between Aetna Life Insurance and Annuity Company ("AETNA") and Calvert Asset
Management Company ("CALVERT").
WHEREAS, AETNA and CALVERT are parties to an Agreement dated March 13, 1989;
and
WHEREAS, Aetna and CALVERT now desire to modify the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual convenants and
promises expressed herein, the parties agree as follows:
1. Shares of Calvert Socially Responsible Series of Acacia Capital Corporation
shall be made available to serve as underlying investment media within Variable
Annuity Contracts offered by AETNA in Internal Revenue Code (IRC) Section
403(b), 457, and 401(a) plans.
2. All references in the Agreement to INTERNAL REVENUE CODE (IRC) 403(b)
AND/OR 457 PLANS shall be deemed to also include IRC 401(a) plans.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of
the date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /S/ THOMAS L. WEST, JR.
-------------------------
Name: Thomas L. West, Jr.
Title: Senior Vice President
CALVERT ASSET MANAGEMENT COMPANY
By: /S/ WILLIAM T. TARTIKOFF
-------------------------
Name: William T. Tartikoff
Title: Chief General Counsel
<PAGE>
PARTICIPATION AGREEMENT
AMONG
VARIABLE INSURANCE PRODUCTS FUND
FIDELITY DISTRIBUTORS CORPORATION
AND
AETNA LIFE INSURANCE AND ANNUITY COMPANY
THIS AGREEMENT, made and entered into as of the 1st day of February, 1994
by and among AETNA LIFE INSURANCE AND ANNUITY COMPANY, (hereinafter the
"Company"), a Connecticut corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts (hereinafter
the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and the
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated October 15, 1985 (File No. 812-6102), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
<PAGE>
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable life
insurance, funding agreements, and variable annuity contracts under the 1933
Act; and
WHEREAS, each Account is duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company, on
the date shown for such Account on Schedule A hereto, to set aside and invest
assets attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I.
SALE OF FUND SHARES
1.1 The Underwriter agrees to sell to the Company those shares of the Fund
which each Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Fund or its designee of the order
for the shares of the Fund. For purposes of this Section 1.1, the Company shall
be the designee of the Fund for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 9:00 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2 The Fund agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by the Company and its Accounts on
those days on which the Fund calculates its net asset value pursuant to rules of
the Securities and Exchange Commission and the Fund shall use reasonable efforts
to calculate such net asset value on each day which the
-2-
<PAGE>
New York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4 The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company, executing such requests on
a daily basis at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. For purposes of this Section 1.5,
the Company shall be the designee of the Fund for receipt of requests for
redemption from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such request for
redemption on the next following Business Day.
1.6 The Company agrees to purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund and in accordance with the
provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Fund and Underwriter prior to their signing this Agreement (a list
of such funds appearing on Schedule C to this Agreement); or (d) the Fund or
Underwriter consents to the use of such other investment company.
1.7 The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, upon receipt
-3-
<PAGE>
by the Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to
receive all such income dividends and capital gain distributions as are payable
on the Portfolio shares in additional shares of that Portfolio. The Company
reserves the right to revoke this election and to receive all such income
dividends and capital gain distributions in cash. The Fund shall notify the
Company of the number of shares so issued as payment of such dividends and
distributions.
1.10 The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7 p.m. Boston time.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act or are exempt from registration thereunder; that
the Contracts will be issued and sold in compliance in all material respects
with all applicable Federal and State laws and that the sale of the Contracts
shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under Section 38a-433 of the
Connecticut Insurance Code and has registered or, prior to any issuance or sale
of the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Connecticut and
all applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
-4-
<PAGE>
2.3 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4 The Company represents that the Contracts are currently treated as
endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Connecticut and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Connecticut to the extent required to perform this
Agreement.
2.7 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Connecticut and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8 The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
2.9 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal and
state securities laws and that the Adviser shall perform its obligations for the
Fund in compliance in all material respects with the laws of the State of
Connecticut and any applicable state and federal securities laws.
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2.10 The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individual/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less $2
million. The aforesaid includes coverage for larceny and embezzlement is issued
by a reputable bonding company. The Company agrees to make all reasonable
efforts to see that this bond or another bond containing these provisions is
always in effect, and agrees to notify the Fund and the Underwriter in the event
that such coverage no longer applies.
ARTICLE III.
PROSPECTUSES AND PROXY STATEMENTS: VOTING
3.1 The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2 The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received from
Contract owners; and
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(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such portfolio for which
instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset amount in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
3.5 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act
in accordance with the Securities and Exchange Commission's interpretation of
the requirements of Section 16(a) with respect to periodic elections of trustees
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV.
SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund or its investment adviser or the Underwriter is named, at least
fifteen Business Days prior to its use. No such material shall be used if the
Fund or its designee reasonably objects to such use within fifteen Business Days
after receipt of such material.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee or
by the Underwriter, except with the permission of the Fund or the Underwriter or
the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or its separate
account(s), is named at least fifteen Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.
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4.4 The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
Statements of Additional Information, shareholder reports, and proxy materials.
ARTICLE V.
FEES AND EXPENSES
5.1 The Fund and Underwriter shall pay no fee or other compensation to the
Company under this agreement, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution expenses,
then the Underwriter may make payments to the Company or to the underwriter for
the Contracts if and in amounts agreed to by the Underwriter in writing and such
payments will be made out of existing fees otherwise payable to the Underwriter,
past profits of the Underwriter or other resources available to the Underwriter.
No such payments shall be made directly by the Fund. Currently, no such
payments are contemplated.
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5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law, all taxes on the issuance or
transfer of the Fund's shares.
5.3 The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI.
DIVERSIFICATION
6.1 The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund will at all times comply with Section 817(h) of
the Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance with the grace period afforded by
Regulation 817-5.
ARTICLE VII.
POTENTIAL CONFLICTS
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
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7.2 The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that vote in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately
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remedies any irreconcilable material conflict, but in no event will the Fund be
required to establish a new funding medium for the Contracts. The Company shall
not be required by Section 7.3 to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the irreconcilable material
conflict. In the event that the Board determines that any proposed action does
not adequately remedy any irreconcilable material conflict, then the Company
will withdraw the Account's investment in the Fund and terminate this Agreement
within six (6) months after the Board informs the Company in writing of the
foregoing determination, provided, however, that such withdrawal and termination
shall be limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 63-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII.
INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a) The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and;
(i) arise out of or are used based upon an untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or
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such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf
of the Fund for use in the Registration Statement or prospectus for
the Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or
sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of
or result from any other material breach of this Agreement by the
Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
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against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2 INDEMNIFICATION BY THE UNDERWRITER
8.2(a) The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the "
Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Contracts and;
(i) arise out of or are used based upon an untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
the Underwriter or Fund by or on behalf of the Company for
use in the Registration Statement or prospectus for the Fund
or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
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(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus,
or sales literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished to the Company by or on behalf of the
Fund; or
(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement (including
a failure, whether unintentional or in good faith or otherwise, to
comply with the diversification requirements specified in Article VI
of this Agreement); or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Underwriter in this Agreement or arise out
of or result from any other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
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8.2(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3 INDEMNIFICATION BY THE FUND
8.3(a) The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the "
Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and;
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement (including
a failure to comply with the diversification requirements specified in
Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b) The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Underwriter or each Account, whichever applicable.
8.3(c) The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election
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to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d) The Company and the Underwriter agree promptly to notify the Fund
of the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
ARTICLE IX.
APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X.
TERMINATION
10.1 This Agreement shall continue in full force and effect until the first
to occur of:
(a) termination by any party for any reason by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any
-16-
<PAGE>
successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified
in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written notice
to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company and/or its affiliated
companies has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement
or is the subject of material adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice to the
Company, if the Company gives the Fund and the Underwriter the
written notice specified in Section 1.6(b) hereof and at the time
such notice was given there was no notice of termination
outstanding under any other provision of this Agreement; provided,
however, any termination under this Section 10.1(h) shall be
effective forty-five (45) days after the notice specified in
Section 1.6(b) was given.
10.2 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the Contracts
(as opposed to Fund shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"). Upon request, the
Company will promptly furnish to the Fund and the Underwriter the option of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Underwriter) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption. Furthermore, except
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<PAGE>
in cases where permitted under the terms of the Contracts, the Company shall not
prevent Contract Owners from allocating payments to a Portfolio that was
otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so
ARTICLE XI.
NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
82 Devonshire Street
Boston, MA 02109
Attention: Treasurer
If to the Company:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Conveyor RTA1
Hartford, CT 06156
Attention: Drew Lawton
If to the Underwriter:
82 Devonshire Street
Boston, MA 02109
Attention: Treasurer
ARTICLE XII.
MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.1 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
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<PAGE>
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitations the SEC, the
NASD and state insurance regulators)j and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.9 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee copies of the following reports:
(a) the Company's annual statement prepared under statutory accounting
principles) and annual report (prepared under generally accepted
accounting principles ("GAAP")), as soon as practical and in any event
within 90 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), as soon as
practical and in any event within 45 days after the end of each
quarterly period;
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
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<PAGE>
(d) any registration statement (without exhibits) and financial reports of
the Company filed with the Securities and Exchange Commission or any
state insurance regulator, as soon as practical after the filing
thereof;
(e) any other report submitted to the Company by independent accountants
in connection with any annual, interim or special audit made by them
of the books of the Company, as soon as practical after the receipt
thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its duly authorized representative and its seal
to be hereunder affixed hereto as of the date specified below.
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<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By its authorized officer,
By: /s/ Shaun P. Mathews
--------------------
Title: Senior Vice President
Date 2/18/96
VARIABLE INSURANCE PRODUCTS FUND
By its authorized officer,
By: /s/ J. Gary Burkhead
--------------------
Title: Senior Vice President
Date: 3/2/94
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By: /s/ Kurt A. Lange
-----------------
Title President
Date: 2/28/94
-21-
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Contracts Funded
Date Established by Board of Directors by Separate Account
- -------------------------------------- -------------------
Separate Account C IRA-CDA-IC
G-TDA-HH(XC/M)
G-TDA-HH(XC/S)
Separate Account D F.6F-PVA-TR
GFA-PVA-IC
GF-PVA-IC
-22-
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of
the Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status
of the Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call
in the number of Customers to Fidelity, as soon as possible, but no
later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide at least one copy of the last
Annual Report to the Company.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund)
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<PAGE>
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folder notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes
are provided and paid for by the Insurance Company). Contents of
envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to Fidelity
Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by Fidelity in the past.
9. Signature on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, if the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.
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<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be NOT RECEIVED for the purposes
of vote tabulation. Any Cards that have "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards
are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to
sort the Cards as they first arrive into categories depending upon
their vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives the
tabulations stated in terms of a percentage and the number of SHARES.)
Fidelity Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00 a.m.
Boston time. Fidelity Legal may request an earlier deadline if
required to calculate the vote in time for the meeting.
14. A certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. Fidelity Legal will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
Fidelity Legal will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
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<PAGE>
SCHEDULE C
Sponsors of other investment companies currently available under variable
annuities or variable life insurance issued by the Company:
Twentieth Century Investors
Neuberger & Berman
Calvert
Scudder
Franklin
Lexington
Alger
-26-
<PAGE>
FIFTH AMENDMENT TO
PARTICIPATION AGREEMENT
THIS FIFTH AMENDMENT TO THE FUND PARTICIPATION AGREEMENT (the "Fifth
Amendment") is made and entered into as of the 1st day of March, 1996, by and
among AETNA LIFE INSURANCE AND ANNUITY COMPANY (the "Company") a Connecticut
corporation, on its own behalf and on behalf of each segregated asset account of
the Company (each an "Account") set forth on Schedule A of the Original
Agreement (defined below), and the VARIABLE INSURANCE PRODUCTS FUND, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (the
"Underwriter"), a Massachusetts corporation.
WITNESSETH
WHEREAS, the Company, the Fund and the Underwriter are parties to a
Participation Agreement, dated February 1, 1994, as supplemented by First
Amendment to Participation Agreement dated as of February 1, 1995, Amendment No.
2 to Participation Agreement dated as of December 15, 1994, Third Amendment to
Participation Agreement dated as of May 1, 1995 and Fourth Amendment to
Participation Agreement dated as of January 1, 1996 (the "Original Agreement");
and
WHEREAS, the Company, the Fund and the Underwriter now desire to modify the
Original Agreement to add additional Contracts funded by Variable Annuity
Account C.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and promises expressed herein, the parties agree as follows:
1. Schedule A of the Original Agreement is hereby deleted and replaced
with Schedule A attached hereto, effective as of March 1, 1996;
2. the Original Agreement, as supplemented by this Fifth Amendment, is
ratified and confirmed; and
3. this Fifth Amendment may be executed in two or more counterparts,
which together shall constitute one instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as
of the date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: ________________________
Name: Laura R. Estes
Title: Senior Vice President
VARIABLE INSURANCE PRODUCTS FUND
By: ________________________
Name:
Title:
FIDELITY DISTRIBUTORS CORPORATION
By: ________________________
Name:
Title:
-28-
<PAGE>
SCHEDULE A
NAME OF SEPARATE ACCOUNT POLICY FORM NUMBERS OF CONTRACTS ISSUED
THROUGH SEPARATE ACCOUNT
Variable Annuity Account B I-CDA-IC(IR/NY)
I-CDA-IC(NQ/NY)
I-CDA-IC(IR/MP)
I-CDA-IC(NQ/MP)
G-CDA-IB(IR)
G-CDA-IC(IR)
G-CDA-IC(NQ)
GMCC-IC(NQ)
G-CDA-HF
I-CDA-IA
I-CDA-HI(NQ)
G-CDA-ID(DC)
G-CDA-GP1(4/94)
I-CDA-GP1(4/94)
Variable Life Account B 70180-93US
70182-93US
70181-94US
38899
38899-90
38899-93
70225-95
Variable Annuity Account C G-CDA-IB(XC/SM)
G-CDA-IA(RPM/XC)
G-CDA-IB(AORP)
G-CDA-IB(ATORP)
G-401-IB(X/M)
G-CDA-HF
GTCC-HF
G-CDA-IA(RP)
G-TDA-HH(XC/M)
G-TDA-HH(XC/S)
GLID-CDA-HO
IRA-CDA-IC
IP-CDA-IB(WI)
IP-CDA-IB(MN)
IP-CDA-IB(WA)
G-CDA-ID(DC)
GIP-CDA-HB
I-CDA-HD
IA-CDA-IA
G-CDA-IB(IR)
A001RP95
A007RC95
A020RV95
A027RV95
Separate Account D GF-PVA-IC(NY)
GF-PVA-IC(CA)
GF-PVA-IC(NJ)
GFA-PVA-IC
<PAGE>
F.6F-PVA-TR
Any state variation of the above-referenced contracts are considered included on
this Schedule A.
Date of Amendment: March 1, 1996
30
<PAGE>
PARTICIPATION AGREEMENT
AMONG
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
AND
AETNA LIFE INSURANCE AND ANNUITY COMPANY
THIS AGREEMENT, made and entered into as of the 1st day of February, 1994
by and among AETNA LIFE INSURANCE AND ANNUITY COMPANY, (hereinafter the
"Company"), a Connecticut corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincoporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and the
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is dividend into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 17, 1986 (File No. 812-6422), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
FIDELITY VIP I 5TH AMDT.
03/06/96 8:31 PM
<PAGE>
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable life
insurance, funding agreements and variable annuity contracts under the 1933 Act;
and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account as net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I.
SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of the Fund
which each Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Fund or its designee of the order
for the shares of the Fund. For purposes of this Section 1.1, the Company shall
be the designee of the Fund for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 9:00 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by the Company and its Accounts on
those days on which the Fund calculates its net asset value pursuant to rules of
the Securities and Exchange Commission and the Fund shall use reasonable efforts
to calculate such net asset value on each day which the
-2-
<PAGE>
New York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company, executing such requests on
a daily basis at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. For purposes of this Section 1.5,
the Company shall be the designee of the Fund for receipt of requests for
redemption from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such request for
redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund and in accordance with the
provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the fund; or (b) the Company
give the Fund the Underwriter 45 days written notice of its intention to make
such other investment company available as a funding vehicle for the Contacts;
or (c) such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Fund and Underwriter prior to their signing this Agreement (a list of such funds
appearing on Schedule C to this Agreement); or (d) the Fund or Underwriter
consents to the use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, upon receipt
-3-
<PAGE>
by the Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital
gains distributions payable on the Fund's shares. The Company hereby elects to
receive all such income dividends and capital gain distributions as are payable
on the Portfolio shares in additional shares of that Portfolio. The Company
reserves the right to revoke this election and to receive all such income
dividends and capital gain distribution in cash. The Fund shall notify the
Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act or are exempt from registration thereunder; that
the Contracts will be issued and sold in compliance in all material respects
with all applicable Federal and State laws and that the sale of the Contracts
shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under Section 38a-433 of the
Connecticut Insurance Code and has registered or, prior to any issuance or sale
of the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sole in compliance with the laws of the State of Connecticut and
all applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its share under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
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2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The fund as adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the fund undertakes to have a board of
trustees, a majority of whom are no interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Connecticut and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Connecticut to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Connecticut and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal and
state securities laws and that the Adviser shall perform its obligations for the
Fund in compliance in all material respects with the laws of the State of
Connecticut and any applicable state and federal securities laws.
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2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less than
$2 million. The foresaid includes coverage for larceny and embezzlement is
issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III.
PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospectus owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If an to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
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(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such portfolio for
which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate account participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provision of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act
in accordance with the Securities and Exchange Commission's interpretation of
the requirements of Section 16(a) with respect to periodic elections of trustees
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV.
SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund or its investment adviser or the Underwriter is named, at least
fifteen Business Days prior to its use. No such material shall be used if the
Fund or its designee reasonably objects to such use within fifteen Business Days
after receipt of such material.
4.2. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented form
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee or
by the Underwriter, except with the permission of the Fund or the Underwriter or
the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or its separate
account(s), is named at least fifteen Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.
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4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording., videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
Statements of Additional Information, shareholder reports, and proxy materials.
ARTICLE V.
FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation to the
Company under this agreement, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution expenses,
then the Underwriter may make payments to the Company or to the underwriter for
the Contracts if and in amounts agreed to by the Underwriter in writing and such
payments will be made out of existing fees otherwise payable to the Underwriter,
past profits of the underwriter or other resources available to the Underwriter.
No such payments shall be made directly by the Fund. Currently, no such
payments are contemplated.
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<PAGE>
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sales. The Fund shall bear the expenses
for the cost of registration and qualification of the Fund's shares, preparation
and filing of the Fund's prospectus and registration statement, proxy materials
and reports, setting the prospectus in type, setting in type and printing the
proxy materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual reports), the preparation of all
statements and notices required by any federal or state law, all taxes on the
issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI.
DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in such a
matter as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund will at all times comply with Section 817(h) of
the Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance with the grace period afforded by Regulation
817-5.
ARTICLE VII.
POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
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<PAGE>
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If its is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
give written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict: provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares for the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately
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<PAGE>
remedies any irreconcilable material conflict, but in no event will the Fund be
required to establish a new funding medium for the Contracts. The Company shall
not be required by Section 7.3 to establish a new funding medium for the
Contract if an offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the irreconcilable material
conflict. In the event that the Board determines that any proposed action does
not adequately remedy any irreconcilable material conflict, then the Company
will withdraw the Account's investment in the fund and terminate this Agreement
within six (6) months after the Board informs the Company in writing of the
foregoing determination, provided, however, that such withdrawal and termination
shall be limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
7.7. If an to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII.
INDEMNIFICATION
8.1. INDEMNIFICATIOn BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expense), to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or
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<PAGE>
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
the Company by or on behalf of the Fund for use in the
Registration Statement or prospectus for the Contracts or in
the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the
fund not supplied by the Company, or persons under its
control) or wrongful conduct of the Company or persons under
its control, with respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Section 8.1(b) and 8.1(c)
hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
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<PAGE>
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statue,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf of the Company
for use in the Registration Statement or prospectus for the Fund or
in sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations (other
than statements ore representations contained in the Registration
Statement, prospectus or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or
wrongful conduct of the Fund. Adviser or Underwriter or persons
under their control, with respect to the sale or distribution of
the Contracts or Fund shares; or
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<PAGE>
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus,
or sales literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished to the Company by or on behalf of the
Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
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<PAGE>
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statue,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements results from the
gross negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election
-15-
<PAGE>
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the Fund
of the commencement of any litigation or proceedings against it or any of its
respective officer or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
ARTICLE IX.
APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X.
TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are
not reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
any of the Portfolio's shares are not registered, issued or
sold in accordance with applicable state and/or federal law
or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be
issued by the Company; or
(d) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M
-16-
<PAGE>
of the Code or under any successor or similar provision, or
if the Company reasonably believes that the Fund may fail to
so qualify; or
(e) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or
its affiliated companies has suffered a material adverse
charge in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or
the Underwriter has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of
material adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision
of this Agreement; provided, however any termination under
this Section 10.1(h) shall be effective forty-five (45) days
after the notice specified in Section 1.6(b) was given.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contract"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"). Upon request, the
Company will promptly furnish to the Fund and the Underwriter the opinion of
counsel for the Company (which
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<PAGE>
counsel shall be reasonably satisfactory to the Fund and the Underwriter) to the
effect that any redemption pursuant to clause (ii) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under the terms of the
Contracts, the Company shall not prevent Contract Owners from allocating
payments to a Portfolio that was otherwise available under the Contracts without
first giving the Fund or the Underwriter 90 days notice of its intention to do
so.
ARTICLE XI.
NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Conveyor RTAI
Hartford, CT 06156
Attention: Drew Lawton
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII.
MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
-18-
<PAGE>
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to the
fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP")), as soon as
practical and in any event within 90 days after the end of each
fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), as soon
as practical and in any event within 45 days after the end of
each quarterly period;
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<PAGE>
(c) any financial statement, proxy statement, notice of report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as practical
after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
-20-
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By its authorized officer,
By: /s/ Shaun P. Mathews
--------------------
Title: Senior Vice President
Date: 2/18/94
VARIABLE INSURANCE PRODUCTS FUND II
By its authorized officer,
By: /s/ J. Gary Burkhead
--------------------
Title: Senior Vice President
Date: 3/2/294
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By: /s/ Kurt A. Lange
-----------------
Title: President
Date: 2/28/94
-21-
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATE CONTRACTS
<TABLE>
<CAPTION>
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Separate Account C IRA-CDA-IC
G-TDA-HH(XC/M)
G-TDA-HH(XC/S)
Separate Account D F.6F-PVA-TR
GFA-PVA-IC
GF-PVA-IC
</TABLE>
-22-
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customer's receipt of a proxy statement.
Underwriter will provide at least one copy of the last Annual Report to the
Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
-23-
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to Customers
by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but NOT including) the
meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
property, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be NOT RECEIVED for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g., mutilated, illegible) of the procedure
are
-24-
<PAGE>
"hand verified," i.e., examined as to why they did not complete the system.
Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulation stated
in terms of a percentage and the number of SHARES.) Fidelity Legal must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form of each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
-25-
<PAGE>
FIFTH AMENDMENT TO
PARTICIPATION AGREEMENT
THIS FIFTH AMENDMENT TO THE FUND PARTICIPATION AGREEMENT (the "Fifth
Amendment") is made and entered into as of the 1st day of March, 1996, by and
among AETNA LIFE INSURANCE AND ANNUITY COMPANY (the "Company") a Connecticut
corporation, on its own behalf and on behalf of each segregated asset account of
the Company (each an "Account") set forth on Schedule A of the Original
Agreement (defined below), and the VARIABLE INSURANCE PRODUCTS FUND II, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (the
"Underwriter"), a Massachusetts corporation.
WITNESSETH
WHEREAS, the Company, the Fund and the Underwriter are parties to a
Participation Agreement, dated February 1, 1994, as supplemented by First
Amendment to Participation Agreement dated as of February 1, 1995, Amendment
No. 2 to Participation Agreement dated as of December 15, 1994, Third
Amendment to Participation Agreement dated as of May 1, 1995 and Fourth
Amendment to Participation Agreement dated as of January 1, 1996 (the
"Original Agreement"); and
WHEREAS, the Company, the Fund and the Underwriter now desire to modify the
Original Agreement to add additional Contracts funded by Variable Annuity
Account C.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and promises expressed herein, the parties agree as follows:
1. Schedule A of the Original Agreement is hereby deleted and replaced with
Schedule A attached hereto, effective as of March 1, 1996;
2. the Original Agreement, as supplemented by this Fifth Amendment, is
ratified and confirmed; and
3. this Fifth Amendment may be executed in two or more counterparts, which
together shall constitute one instrument.
-26-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as of
the date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By:
------------------------
Name: Laura Estes
Title: Senior Vice President
VARIABLE INSURANCE PRODUCTS FUND II
By:
---------------------
Name: J. Gary Burkhead
Title: Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By:
-----------------
Name: Kurt A. Lange
Title: President
-27-
<PAGE>
SCHEDULE A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POLICY FORM NUMBERS OF CONTRACTS ISSUED
NAME OF SEPARATE ACCOUNT THROUGH SEPARATE ACCOUNT
- ----------------------------------------------------------------------
<S> <C>
Variable Annuity Account B I-CDA-IC(IR/NY)
I-CDA-IC(NQ/NY)
I-CDA-IC(IR/MP)
I-CDA-IC(NQ/MP)
G-CDA-IB(IR)
G-CDA-IC(IR)
G-CDA-IC(NQ)
GMCC-IC(NQ)
G-CDA-HF
I-CDA-IA
I-CDA-HI(NQ)
G-CDA-ID(DC)
G-CDA-GP1(4/94)
I-CDA-GP1(4/94)
- ----------------------------------------------------------------------
Variable Life Account B 70180-93US
70182-93US
70181-94US
38899
8899-90
38899-93
70225-95
- ----------------------------------------------------------------------
Variable Annuity Account C G-CDA-IB(XC/SM)
G-CDA-IA(RPM/XC)
G-CDA-IB(AORP)
G-CDA-IB(ATORP)
G-401-IB(X/M)
G-CDA-HF
GTCC-HF
G-CDA-IA(RP)
G-TDA-HH(XC/M)
G-TDA-HH(XC/S)
GLID-CDA-HO
IRA-CDA-IC
IP-CDA-IB(WI)
IP-CDA-IB(MN)
IP-CDA-IB(WA)
G-CDA-ID(DC)
GIP-CDA-HB
I-CDA-HD
IA-CDA-IA
G-CDA-IB(IR)
A001RP95
A007RC95
A020RV95
A027RV95
- ----------------------------------------------------------------------
Separate Account D GF-PVA-IC(NY)
GF-PVA-IC(CA)
GF-PVA-IC(NJ)
GFA-PVA-IC
F.6F-PVA-TR
- --------------------------------------------------------------------------------
</TABLE>
Any state variation of the above-referenced contracts are considered included on
this Schedule A.
Date of Amendment: March 1, 1996
<PAGE>
AGREEMENT
THIS AGREEMENT made by and between FRANKLIN ADVISERS, INC. ("FAI"), a California
corporation, and AETNA LIFE INSURANCE AND ANNUITY COMPANY ("AETNA"), a life
insurance company organized under the laws of the State of Connecticut,
regarding FRANKLIN GOVERNMENT SECURITIES TRUST ("TRUST"), a Massachusetts
business trust, is as follows:
WHEREAS, TRUST is to be registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940 ("1940 Act") as an
open-end management investment company and its securities are to be registered
under the Securities Act of 1933 ("1933 Act");
WHEREAS, TRUST is to be used solely as a funding vehicle for variable
annuity insurance contracts offered by life insurance companies through separate
accounts of such life insurance companies; and
WHEREAS, AETNA has established Aetna Life Insurance and Annuity Company
Variable Annuity Account C, a separate account, and other separate accounts to
offer variable annuity contracts, and is desirous of having TRUST serve as one
of the funding vehicles for one or more such separate accounts;
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained, it is hereby agreed by and between FAI and AETNA as follows:
1. FAI shall organize TRUST with investment objectives, policies, and
restrictions substantially identical to those of Franklin U.S. Government
Securities Series, another open-end management investment company managed by
FAI, except as such objectives and policies may have to be modified to comply
with applicable insurance laws. FAI shall provide the necessary officers and
trustees of TRUST and shall take all steps necessary to register TRUST and its
securities with the Securities and Exchange Commission and in any states where
such registration may be required. FAI shall pay all costs and expenses of such
organization and registration, and may be reimbursed by TRUST for such expenses
as permitted under applicable securities laws.
2. (a) FAI shall act as investment adviser to TRUST for an annual fee,
payable monthly, of 0.625% of the average daily net assets of TRUST reduced on
assets of $100 million or more in accordance with the TRUST prospectus. FAI
shall pay to AETNA from this fee an annual amount, payable monthly, equal to
.15% of the average daily net assets of TRUST for certain administrative
services to be provided by AETNA. FAI shall not waive any portion of its fee
without the written consent of AETNA, and shall use its best efforts to keep its
investment management contract with TRUST in effect as required by the 1940 Act.
Page 1
<PAGE>
(b) FAI will promptly provide AETNA with copies of the minutes of all
proceedings of the Board of Trustees of TRUST, or any committee thereof,
together with all agreements presented at such meetings.
(c) FAI will promptly provide AETNA with copies of all filings made
with the SEC pertaining to TRUST.
(d) AETNA will promptly provide FAI with copies of all filings made
with the SEC pertaining to separate accounts for which the TRUST serves as a
funding vehicle.
3. TRUST will make its shares available at net asset value to the
separate account(s) designated by AETNA.
4. TRUST will not make its shares available to any other company without
the written consent of AETNA. However, future exclusivity of TRUST will be
subject to the attainment of certain asset growth targets to be agreed upon by
FAI and AETNA.
5. During the calendar years of 1989 and 1990. Aetna will not in the
Internal Revenue Code Section 457 or Section 403(b) markets, offer to sell the
shares of any other registered open-end management company which invests
primarily in United States government GNMA Securities and has substantially
similar investment objectives as the TRUST.
6. Orders for shares of the TRUST shall be placed with the TRUST pursuant
to procedures which are then in effect and which may be modified from time to
time. TRUST will provide AETNA with documentation of all procedures in effect
when the offer and sale of TRUST shares is to commence and will inform AETNA of
any modifications to such procedures.
7. FAI will diversify TRUST's investments in accordance with the
provisions of Section 817(h) of the Internal Revenue Code and the regulations
thereunder.
8. AETNA shall cause the contracts funded by TRUST shares to be
registered with the SEC under the 1933 Act and the separate account(s) to be
registered with the SEC as unit investment trust(s) under the 1940 Act to the
extent required by these laws, and shall file such documents and take such other
action as needed in order to comply with all requirements of the applicable
insurance laws in connection with the use of TRUST shares as funding vehicles.
9. Any materials used by AETNA which describe TRUST, its shares, or FAI
shall be submitted to FAI for approval prior to use. Aetna shall file, to the
extent required by law, any such materials with the National Association of
Securities Dealers, Inc.
10. (a) AETNA shall be solely responsible for its actions in connection
with its use of TRUST and its shares and shall indemnify and hold harmless
TRUST, and FAI their
Page 2
<PAGE>
officers, directors, and trustees from any liability, including reasonable
attorney's fees, arising from AETNA's use of TRUST or its shares.
(b) FAI shall be solely responsible for its actions in connection
with its management of TRUST and shall indemnify and hold harmless AETNA, its
officers and directors from any liability, including reasonable attorney's fees,
for its negligent or wrongful acts or failures to act with respect to its
management of TRUST.
11. AETNA understands that FAI acts and will act in the future as
investment adviser to other investment companies. However, during 1989, FAI
will not, except as provided in contracts in effect prior to December 1, 1988,
act as an investment advisor to other government or GNMA-type investment
companies that may be sold in the Internal Revenue Code Section 457 or Section
403(b) markets.
12. (a) If, after a presentation on the issue by AETNA, the Board of
Trustees of TRUST, or a majority of its disinterested Trustees, determines that
a material irreconcilable conflict exists, making it not in the best interest of
TRUST to continue to sell shares to AETNA, AETNA shall, at its own expense, take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, which steps may include, but are not limited to:
(1) withdrawing the assets allocable to the separate account(s)
of AETNA from TRUST and reinvesting such assets in a different investment medium
managed by FAI, or submitting to a vote of all affected contract owners the
questions of whether (i) withdrawal of assets from TRUST or (ii) segregation of
assets should be implemented and, as appropriate, withdrawing or segregating the
assets of any particular group that votes in favor of such withdrawal or
segregation, or offering to the affected contract owners the option of making
such a change;
(2) establishing a new registered open-end management investment
company or managed separate account managed by FAI.
(b) For purposes hereof, the Board of Trustees, including a majority
of the disinterested Trustees, shall determine after further discussion with
AETNA whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event will FAI be required to establish a new
funding medium for any variable contracts. AETNA shall not be required by the
terms hereof to establish a new funding medium for any variable contracts if an
offer to do so has been declined by vote of a majority of affected contract
owners.
(c) FAI will promptly make known to AETNA the Board of Trustees'
consideration or determination of the existence of a material irreconcilable
conflict and its implications.
Page 3
<PAGE>
13. AETNA shall provide pass-through voting privileges to all variable
contract owners to the extent required by the SEC. AETNA shall be responsible
for assuring that each of its separate accounts participating in TRUST
calculates voting privileges in a manner consistent with Securities and Exchange
Commission regulations. AETNA will vote shares for which it has not received
voting instructions, as well as shares attributable to it, in the same
proportion as it votes shares for which it has received instructions.
14. FAI and AETNA shall each bear their own expenses in connection with
this transaction; however, if AETNA decides not to make TRUST available as an
investment for its separate accounts, or if the assets of TRUST attributable to
AETNA's separate accounts shall not exceed $2 million within one year after the
first sale of TRUST to AETNA's separate accounts, or $10 million within two
years, or $30 million within three years, it shall reimburse FAI for all of its
out-of-pocket expenses incurred in connection with organizing and registering
TRUST, including advances on such expenses to TRUST, up to a maximum of $25,000.
If AETNA terminates this agreement, and within two (2) years of that termination
it or any AETNA subsidiary or affiliate becomes the investment adviser to TRUST
or its successor, AETNA will pay a fee to FAI equal to one year's management fee
on the assets in the trust at the time of discontinuance.
15. (a) FAI or an affiliate shall provide TRUST with initial capital of
$100,000. Recovery of this capital will be amortized over a period of five
years. If, during this period, AETNA shall decide not to continue using TRUST
as a funding vehicle for the separate account, AETNA shall reimburse FAI for the
amount of unamortized initial capital.
(b) FAI shall pay all costs and expenses of such organization and
registration, and may be reimbursed by TRUST for such expenses to the extent
permitted under applicable securities laws. The TRUST will reimburse FAI for
such expenses to the extent permitted, beginning once the assets of the TRUST
exceed $20 million or the TRUST has completed one year of operation, whichever
is sooner. Such expenses will be amortized by the TRUST over a five year
period, unless a shorter amortization period is required by generally accepted
accounting principles.
16. This Agreement shall terminate automatically in the event of its
assignment.
17. This Agreement may be terminated at any time upon sixty (60) days'
written notice to the other party hereto, without the payment of any penalty
except as provided in paragraph 14 hereof. Such termination shall not affect or
modify the obligations of the parties set forth herein with respect to any
events occurring prior to such termination.
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<PAGE>
18. This Agreement shall be subject to the provisions of the 1940 Act and
the rules and regulations thereunder, including any exemptive relief therefrom
and the orders of the Securities and Exchange Commission setting forth such
relief.
Executed this 31st day of January, 1989
FRANKLIN ADVISERS, INC.
ATTEST: /s/ Maria Eichar BY /s/ C. R. Johnson
--------------------- ------------------------
AETNA LIFE INSURANCE AND ANNUITY
COMPANY
ATTEST: /s/ Barbara Kidney BY: /s/ Richard C. Murphy
--------------------- ------------------------
Page 5
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JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 19th day of April, 1995, between JANUS ASPEN
SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and AETNA LIFE INSURANCE AND ANNUITY COMPANY , a
life insurance company organized under the laws of the State of Connecticut (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Accounts").
W I T N E S S E T H:
WHEREAS, the Trust has filed a registration statement with the
Securities and Exchange Commission to register itself as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and to register the offer and sale of its shares under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Section 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Trust Exemptive Order"); and
WHEREAS, the Company has registered or will register certain variable
life insurance policies and/or variable annuity contracts under the 1933 Act
(the "Contract"); and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
<PAGE>
WHEREAS, the Company desires to utilize shares of one or more Portfolios
as an investment vehicle of the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
SALE OF TRUST SHARES
1.1. The Trust shall make shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Trust, as established in accordance with the provisions of the then
current prospectus of the Trust. The Company will transmit orders from time to
time to the Trust for the purchase of shares of the Portfolios as directed by
Contract owners. The Trustees of the Trust (the "Trustees") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Trustees
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interest of the shareholders of
such Portfolio.
1.2. The Company shall submit payment for shares of the Portfolios
no later than 12:00 noon New York time on the next Business Day after the Trust
receives the order pursuant to Section 1.1. Payments shall be made in federal
funds transmitted by wire to the Trust. Upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Trust for this purpose.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Trust calculates its net asset value pursuant to
the rules of the Securities and Exchange Commission.
1.3. The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net asset
value next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for greater period than is permitted by the 1940 Act.
1.4. Issuance and transfer of the Trust's shares will be by book
entry only. Stock certifications will not be issued to the Company or the
Account. Shares ordered from the Trust will be recorded in the appropriate
title for each Account or the appropriate subaccount of each Account.
1.5. The Trust shall furnish prompt notice to the Company of any
income dividends or capital gain distributions payable on the Trust's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on
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a Portfolio's shares in additional shares of that Portfolio. The Trust shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.6. The Trust shall calculate its net asset value on each Business
Day, as defined in Section 1.2. The Trust shall make the net asset value per
share for each Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated and shall
use its best efforts to make such net asset value per share available by 6 p.m.
New York time.
1.7. The Trust agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Shared
Trust Exemptive Order. No shares of any Portfolio will be sold directly to the
general public. The Company agrees that Trust shares will be used only for the
purposes of funding the Contracts and Accounts listed in Schedule A, as amended
from time to time.
1.8. The Trust agrees that all Participating Insurance Companies
shall have the obligations and responsibilities regarding pass-through voting
and conflicts of interest corresponding to those contained in Section 2.8 and
Article IV of this Agreement.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1. and all taxes to which an issuer is
subject on the issuance and transfer of its shares.
2.2. At the option of the Company, the Trust shall either (a)
provide the Company (at the Company's expense) with as many copies of the
Trust's current prospectus, annual report, semi-annual report and other
shareholder communications, including any amendments or supplements to any of
the foregoing, as the Company shall reasonably request; or (b) provide the
Company with a camera ready copy of such documents in a form suitable for
printing. The Trust shall provide the Company with a copy if its statement of
additional information in a form suitable for duplication by the Company. The
Trust (at its expense) shall provide the Company with copies of any Trust-
sponsored proxy materials in such quantity as the Company shall reasonably
require for distribution to Contract owners.
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2.3. The Company shall bear the costs of printing and distributing
the Trust's prospectus, statement of additional information, shareholder reports
and other shareholder communications to owners of and applicants for policies
for which the Trust is serving or is to serve as an investment vehicle. The
Company shall bear the costs of distributing proxy materials (or similar
materials such as voting solicitation instructions) to Contract owners. The
Company assumes sole responsibility for ensuring that such materials are
delivered to Contract owners in accordance with applicable federal and state
securities laws.
2.4. The Company agrees and acknowledges that the Trust's adviser,
Janus Capital Corporation ("Janus Capital"), is the sole owner of the name and
mark "Janus" and that all use of any designation comprised in whole or part of
Janus (a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of Janus
Capital. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5. The Company shall furnish, or cause to be furnished, to the
Trust or its designee, a copy of each Contract prospectus or statement of
additional information in which the Trust or its investment adviser is named
prior to the filing of such document with the Securities and Exchange
Commission. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust or its investment adviser is named, at least fifteen
Business Days prior to its use. No such material shall be used if the Trust or
its designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
2.6 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
its investment adviser in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
reports of the Trust, Trust-sponsored proxy statements, or in sales literature
or other promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.
2.7. The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Contracts (as such registration statement and prospectus may
be amended or supplemented from time to time), or in materials approved by the
Company for distribution including sales literature or other
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<PAGE>
promotional materials, except as required by legal process or regulatory
authorities or with the written permission of the Company.
2.8. So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the State of
Connecticut and that it has legally and validly established each Account as a
segregated asset account under such law on the date set forth in Schedule A.
3.2. The Company represents and warrants that it has registered or,
prior to any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act prior to any issuance or sale of the Contracts;
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
3.4. The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5. The Trust represents and warrants that the Trust shares offered
and sold pursuant to this Agreement will be registered under the 1933 Act and
the Trust shall be registered under the 1940 Act prior to any issuance or sale
of such shares. The Trust shall amend its registration statement under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register
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<PAGE>
and qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
participating Insurance Companies. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Trustees shall promptly inform the Company if they determine that
an irreconcilable material conflict exists and the implications thereof.
4.2. The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Trustee
Exemptive Order by providing the Trustees with all information reasonably
necessary for the Trustees to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard Contract
owner voting instructions.
4.3. If it is determined by a majority of the Trustees, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists that affects the interests of Contract owners, the Company shall, in
cooperation with other Participating Insurance Companies whose contract owners
are also affected, at its expense and to the extent reasonably practicable (as
determined by the Trustees) take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, which steps could include: (a)
withdrawing the assets allocable to some or all of the Accounts from the Trust
or any Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or submitting the
question of whether or not such segregation should be implemented to a vote of
all affected Contract owners and, as appropriate, segregating the assets of any
appropriate group (I.E., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating
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Insurance Companies) that votes in favor of such segregation, or offering to the
affected contract owners the option of making such a change; and (b)
establishing a new registered management investment company or managed separate
account.
4.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Trust's election, to withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end of such
six (6) month period, the Trust shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six (6) months after the Trustees
inform the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders by the Company for the purchase
and redemption of shares of the Trust.
4.6. For purposes of Section 4.3 and 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared Trust
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if deemed appropriate by the Trustees.
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4.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Trust Exemptive Order) on terms and
conditions materially different from those contained in the Shared Trust
Exemptive Order, then the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable.
ARTICLE V.
INDEMNIFICATION
5.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Trust and each of its Trustees, officers,
employees and agents and each person, if any, who controls the Trust within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Article V) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses"),
to which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved
by the Company on behalf of the Contracts or Accounts (or any
amendment or supplement to any of the foregoing) (collectively,
"Company Documents" for the purposes of this Article V), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this indemnity shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately derived
from written information furnished to the Company by or on behalf
of the Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2(a)) or
wrongful conduct of the Company or persons under its control,
with respect to the sale or acquisition of the Contracts or Trust
shares; or
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(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust Documents
as defined in Section 5.2(a) or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately
derived from written information furnished to the Trust by or on
behalf of the Company; or
(d) arise out of or result from any failure by the Company to provide
the services or furnish the materials required under the terms of
this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
5.2. INDEMNIFICATION BY THE TRUST. The Trust agrees to indemnify
and hold harmless the Company and each of its directors, officers, employees and
agents and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation, or at
common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a
registration statement or prospectus for the Trust (or any
amendment or thereto) (collectively, "Trust Documents" for the
purposes of this Article V), or arise out of or are based upon
the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and was accurately derived from written information
furnished to the Trust by or on behalf of the Company for use in
Trust Documents or otherwise for use in connection with the sale
of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Trust
or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
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(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived from
written information furnished to the Company by or on behalf of
the Trust; or
(d) arise out of or result from any failure by the Trust to provide
the services or furnish the materials required under the terms of
this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Trust.
5.3. Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified party that arise from
such Indemnified party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified party's duties or by reasons of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified party shall have received notice of
service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
party in the absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against the Indemnified
Parties, the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the Indemnified party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
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ARTICLE VI.
TERMINATION
6.1. This Agreement may be terminated by either party for any reason
by ninety (90) days advance written notice delivered to the other party.
6.2. Notwithstanding any termination of this Agreement, the Trust
shall, at the option of the Company, continue to make available additional
shares of the Trust (or any Portfolio) pursuant to the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement, provided that the Company continues to pay the costs set
forth in Section 2.3
6.3. The provisions of Article V shall survive the termination of
this Agreement, and the provisions of Article IV and Section 2.8 shall survive
the termination of this Agreement as long as shares of the Trust are held on
behalf of Contract owners in accordance with Section 6.2.
ARTICLE VII.
NOTICES
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Trust:
100 Fillmore Street, Suite 300
Denver, Colorado 80206
Attention: David C. Tucker, Esq.
If to the Company:
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Barrett N. Sidel, RE4C
ARTICLE VIII. MISCELLANEOUS
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
8.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
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8.3. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of Colorado
8.5. The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6. Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
8.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
8.8. The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the prior written approval of the other
party.
8.10. No provisions of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized and executed by
both parties.
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
AETNA LIFE INSURANCE
AND ANNUITY COMPANY
By: /s/ Scott A. Striegel
-----------------------
Name: Scott A. Striegel
Title: Senior Vice President
JANUS ASPEN SERIES
By: /s/ Jack R. Thompson
-----------------------
Name: Jack R. Thompson
Title: Senior Vice President
13
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and
Date Established by Board of Directors
- --------------------------------------
Separate Account Variable Annuity Account B was organized as a separate account
of the Company on June 25, 1974 pursuant to authorization given by vote of the
Company's Board of Directors on May 10, 1974.
Contracts Funded by Separate Account
Variable Annuity Account B
<TABLE>
<CAPTION>
<S> <C> <C>
CDA-66A PT-CDA-66 I-CDA-HI(NQ/TX)*
CDA-66 PT-CDA-66A I-CDA-HI(NQ/WA)*
GA-UP-66 PTI-CDA-GA I-CDA-IO(MN)*
GDA-66-(SP) PTS-CDA-GA I-CDA-IA
GDA-UA-67 INI-CDA-GA I-CDA-IC(NQ/MP)
GDA-PCA-67 INS-CDA-GA PT-CDA-66A(NY)
GA-TF-67 PTI-CDA-GB PTI-CDA-GA(NY)
GA-TF-GO PTI-CDA-GI PTS-CDA-GA(NY)
GA-UPA-GO ISSE-CDA-HO INI-CDA-GA(NY)
GA-UPC-GO ISE-CDA-HO INS-CDA-GA(NY)
GQNQS-AUA-GH INSBP-CDA-GE IA-CDA-IA(MN)*
GQNQI-AUA-GH IQNQI-CDA-GH IA-CDA-IA(PA)*
GQNQJS-AUA-GH IQNQS-CDA-GH IA-CDA-IA(PR)*
GQNQJC-AUA-GI IQNQI-CDA-GI I-CDA-HD
GQNQJI-AUA-GI IQNQS-CDA-GI I-CDA-HD(TX/S)*
GQNQS-AUA-GI DCAS-CDA-GE I-CDA-HD(A)*
GQNQJS-AUA-GI DRPAI-CDA-GE PTI-CDA-GB(NY)
GQNQI-AUA-GI I-CDA-HD INSBP-CDA-GE(NY)
GQNQJI-AUA-GH I-CDA-HD(A)(1) DCAS-CDA-GE(NY)
GQNQJC-AUA-GH I-CDA-HD(SC)* DRPAI-CDA-GE(NY)
GLID-CDA-HO I-CDA-HD(TX/E)* I-CDA-HD(XC)
GID-CDA-HO I-CDA-HD(TX/M)* I-CDA-IC(IR/MP)
GSD-CDA-HO I-CDA-HD(TX/P)* G-CDA-HD(XC)
GLIDE-CDA-HO I-CDA-HD(TX/S)* GTCC-HD(XC)
G-CDA-HD I-CDA-HI(NQ) GA-TF-GO(NY)
G-CDA-HD(NS) I-CDA-HI(NQ/CT)* GA-UPA-GO(NY)
G-CDA-HF I-CDA-HI(NQ/MN)* GA-UPC-GO(NY)
G-CDA-IA(OH) I-CDA-HI(NQ/NJ)* I-CDA-IC(NQ/MP)
G-CDA-IB(IR) I-CDA-HI(NQ/PA)*
G-CDA-IC(IR) I-CDA-HI(NQ/SC)*
</TABLE>
(1) Contract for use in MN and MO
* State Specific forms
A-1
<PAGE>
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and
Date Established by Board of Directors
- --------------------------------------
Separate Account Variable Annuity Account C was organized as a separate account
of the Company on June 25, 1974 pursuant to authorization given by vote of the
Company's Board of Directors on May 10, 1974.
Contracts Funded by Separate Account
Variable Annuity Account C
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CDA-66A HR10-DUA-GIA DRPAI-CDA-GE PTI-CDA-GA(NY)
CDA-66 HR10S-DUA-GI IHRIRS-CDA-GH PTS-CDA-GA(NY)
GA-UP-66 GIT-CDA-HO IHRIRI-CDA-GH INI-CDA-GA(NY)
GDA-66-(SP) GLID-CDA-HO IQNQI-CDA-GH INS-CDA-GA(NY)
GDA-UA-67 GLIT-CDA-HO IQNQS-CDA-GH PTI-CDA-GB(NY)
GDA-PCA-67 GID-CDA-HO IHRIRI-CDA-GI INSBP-CDA-GE(NY)
GA-TF-67 GST-CDA-HO IHRIRS-CDA-GI TRPAI-CDA-GE(NY)
GA-TF-GO GSD-CDA-HO IQNQI-CDA-GI TPRAS-CDA-GE(NY)
GA-UPA-GO GIH-CDA-HB IQNQS-CDA-GI DCAS-CDA-GE(NY)
GA-UPC-GO G-CDA-HD PTI-CDA-GI DRPAI-CDA-GE(NY)
GDA-PCA-GO G-CDA-HD(NS) IMT-CDA-HO G-CDA-HD(XC)
GDA-OA-GO G-CDA-HF IST-CDA-HO GTCC-HD(XC)
GDA-UA-GO G-CDA-IA(RP) ISP-CDA-HO G-CDA-HD(X)
GDA-UPA-GO G-CDA-IB(ORP)(1) I-CDA-HD G-TDA-HH(XC/M)
GA-TF-68 G-CDA-IB(TORP)(1) I-CDA-HD(A)(3) GTCC-HH(XC/M)
GP-DUA-GF G-CDA-IB-(AORP) I-CDA-HD(SC)* G-TDA-HH(XC/S)
GVF-PI-GF G-CDA-IB(ATORP) I-CDA-HD(TX/E)* GTCC-HH(XC/S)
GP-DUA-GFA G-CDA-IC(A)(2) I-CDA-HD(TX/M)* G-CDA-IA(RPM/XC)
GVF-PS-GF G-CDA-HG(401) I-CDA-HD(TX/P)* GTCC-IA(RPM/XC)
GVF-PI-GG G-TDA-HG I-CDA-HD(TX/S)* G-CDA-IB(XC/SM)
GVF-PS-GG G-CDA-IA(OH) I-CDA-IO(MN)* GC403-IB(XC/SM)
GQNQS-AUA-GH PT-CDA-66 IA-CDA-IA I-CDA-HD(XC)
GQNQI-AUA-GH PT-CDA-66A IA-CDA-IA(MN)* GA-TF-GO(NY)
GQNQJS-AUA-GH PTI-CDA-GA IA-CDA-IA(PA)* GA-UPA-GO(NY)
GQNQJI-AUA-GH PTS-CDA-GA IA-CDA-IA(PR)* GA-UPC-GO(NY)
GQNQJC-AUA-GH INI-CDA-GA IP-CDA-IB GDA-PCA-GO(NY)
GQNQJC-AUA-GI INS-CDA-GA IP-CDA-IB(WI)* GCD-OA-GO(NY)
GQNQJI-AUA-GI PTI-CDA-GB IP-CDA-IB(MN)* GDA-UA-GO(NY)
GQNQS-AUA-GI INSBP-CDA-GE I-CDA-HD G-TDA-HG(X)
GQNQJS-AUA-GI TRPAI-CDA-GE I-CDA-HD(TX/S)*
GQNQI-AUA-GI TPRAS-CDA-GE I-CDA-HD(A)*
HR10-DUA-GI DCAS-CDA-GE PT-CDA-66A(NY)
</TABLE>
(1) Contract for use in ME, OK, SC and TN only
(2) Contract for use in CT, IL and MT
(3) Contract for use in MN and MO
(4) State specific forms
A-2
<PAGE>
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and
Date Established by Board of Directors
- --------------------------------------
Separate Account Variable Life Account B was organized as a separate account of
the Company pursuant to authorization given by vote of the Company's Board of
Directors on June 18, 1986.
Contracts Funded by Separate Account
Variable Life Account B
38899 38899-90 38899-93 70180-93US
<PAGE>
AMENDMENT NO. 3 DATED MARCH 1, 1996 TO FUND
PARTICIPATION AGREEMENT DATED APRIL 19, 1994
WITNESSETH
WHEREAS, the Janus Aspen Series (the "Trust") and Aetna Life Insurance
and Annuity Company (the "Company") entered into a Fund Participation Agreement,
dated April 19, 1994, as supplemented by Amendment No. 1 dated June 15, 1994 and
Amendment No. 2 dated July 31, 1995 (the "Original Agreement"); and
WHEREAS, the Company and the Trust now desire to modify the Original
Agreement to add additional Contracts funded by Account C.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and promises expressed herein, the parties agree as follows:
1. Schedule A of the Original Agreement is hereby deleted and replaced with
Schedule A attached hereto, effective as of March 1, 1996;
2. the Original Agreement, as supplemented by this Amendment No. 3, is
ratified and confirmed; and
3. this Amendment No. 3 may be executed in two or more counterparts, which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 3 as of
the date first above written.
AETNA LIFE INSURANCE AND JANUS ASPEN SERIES
ANNUITY COMPANY
By: /s/ Laura R. Estes By:
------------------- --------------------
Name: Laura R. Estes Name:
--------------------
Title: Senior Vice President Title:
--------------------
(1) Contract for use in MN and MO
* State specific forms
A-1
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and
Date Established by Board of Directors
- --------------------------------------
Separate Account Variable Annuity Account B was organized as a separate account
of the Company on June 25, 1974 pursuant to authorization given by vote of the
Company's Board of Directors on May 10, 1974.
Contracts Funded by Separate Account
Variable Annuity Account B
<TABLE>
<CAPTION>
<S> <C> <C>
CDA-66A PTI-CDA-GA I-CDA-IC(NQ/MP)
CDA-66 PTS-CDA-GA PT-CDA-66A(NY)
GA-UP-66 INI-CDA-GA PTI-CDA-GA(NY)
GDA-66-(SP) INS-CDA-GA PTS-CDA-GA(NY)
GDA-UA-67 PTI-CDA-GB INI-CDA-GA(NY)
GDA-PCA-67 PTI-CDA-GI INS-CDA-GA(NY)
GA-TF-67 ISSE-CDA-HO IA-CDA-IA(MN)*
GA-TF-GO ISE-CDA-HO IA-CDA-IA(PA)*
GA-UPA-GO INSBP-CDA-GE IA-CDA-IA(PR)*
GA-UPC-GO IQNQI-CDA-GH I-CDA-HD
GQNQS-AUA-GH IQNQS-CDA-GH I-CDA-HD(TX/S)*
GQNQI-AUA-GH IQNQI-CDA-GI I-CDA-HD(A)*
GQNQJS-AUA-GH IQNQS-CDA-GI PTI-CDA-GB(NY)
GQNQJC-AUA-GI DCAS-CDA-GE INSBP-CDA-GE(NY)
GQNQJI-AUA-GI DRPAI-CDA-GE DCAS-CDA-GE(NY)
GQNQS-AUA-GI I-CDA-HD DRPAI-CDA-GE(NY)
GQNQJS-AUA-GI I-CDA-HD(A)(1) I-CDA-HD(XC)
GQNQI-AUA-GI I-CDA-HD(SC)* I-CDA-IC(IR/MP)
GQNQJI-AUA-GH I-CDA-HD(TX/E)* G-CDA-HD(XC)
GQNQJC-AUA-GH I-CDA-HD(TX/M)* GTCC-HD(XC)
GLID-CDA-HO I-CDA-HD(TX/P)* GA-TF-GO(NY)
GID-CDA-HO I-CDA-HD(TX/S)* GA-UPA-GO(NY)
GSD-CDA-HO I-CDA-HI(NQ) GA-UPC-GO(NY)
GLIDE-CDA-HO I-CDA-HI(NQ/CT)* I-CDA-IC(NQ/MP)
G-CDA-HD I-CDA-HI(NQ/MN)* I-CDA-IC(IR/NY)
G-CDA-HD(NS) I-CDA-HI(NQ/NJ)* I-CDA-IC(NQ/NY)
G-CDA-HF I-CDA-HI(NQ/PA)* G-CDA-IC(NQ)
G-CDA-IA(OH) I-CDA-HI(NQ/SC)* GMCC-IC(NQ)
G-CDA-IB(IR) I-CDA-HI(NQ/TX)* I-CDA-IA
G-CDA-IC(IR) I-CDA-HI(NQ/WA)* G-CDA-ID(DC)
PT-CDA-66 I-CDA-IO(MN)* G-CDA-GP1(4/94)
PT-CDA-66A I-CDA-IA I-CDA-GP1(4/94)
</TABLE>
(1) Contract for use in MN and MO
* State specific forms
A-1
<PAGE>
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and
Date Established by Board of Directors
- --------------------------------------
Separate Account Variable Annuity Account C was organized as a separate
account of the Company on June 25, 1974 pursuant to authorization given by
vote of the Company's Board of Directors on May 10, 1974.
Contracts Funded by Separate Account
Variable Annuity Account C
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CDA-66A GIT-CDA-HO IQNQS-CDA-GH TRPAI-CDA-GE(NY)
CDA-66 GLID-CDA-HO IHRIRI-CDA-GI TPRAS-CDA-GE(NY)
GA-UP-66 GLIT-CDA-HO IHRIRS-CDA-GI DCAS-CDA-GE(NY)
GDA-66-(SP) GID-CDA-HO IQNQI-CDA-GI DRPAI-CDA-GE(NY)
GDA-UA-67 GST-CDA-HO IQNQS-CDA-GI G-CDA-HD(XC)
GDA-PCA-67 GSD-CDA-HO PTI-CDA-GI GTCC-HD(XC)
GA-TF-67 GIH-CDA-HB IMT-CDA-HO G-CDA-HD(X)
GA-TF-GO G-CDA-HD IST-CDA-HO G-TDA-HH(XC/M)
GA-UPA-GO G-CDA-HD(NS) ISP-CDA-HOG TCC-HH(XC/M)
GA-UPC-GO G-CDA-HF I-CDA-HD G-TDA-HH(XC/S)
GDA-PCA-GO G-CDA-IA(RP) I-CDA-HD(A)3 GTCC-HH(XC/S)
GDA-OA-GO G-CDA-IB(ORP)(1) I-CDA-HD(SC)* G-CDA-IA(RPM/XC)
GDA-UA-GO G-CDA-IB(TORP)(1) I-CDA-HD(TX/E)* GTCC-IA(RPM/XC)
GDA-UPA-GO G-CDA-IB-(AORP) I-CDA-HD(TX/M)* G-CDA-IB(XC/SM)
GA-TF-68 G-CDA-IB(ATORP) I-CDA-HD(TX/P)* GC403-IB(XC/SM)
GP-DUA-GF G-CDA-IC(A)(2) I-CDA-HD(TX/S)* I-CDA-HD(XC)
GVF-PI-GF G-CDA-HG(401) I-CDA-IO(MN)* GA-TF-GO(NY)
GP-DUA-GFA G-TDA-HG IA-CDA-IA GA-UPA-GO(NY)
GVF-PS-GF G-CDA-IA(OH) IA-CDA-IA(MN)* GA-UPC-GO(NY)
GVF-PI-GG PT-CDA-66 IA-CDA-IA(PA)* GDA-PCA-GO(NY)
GVF-PS-GG PT-CDA-66A IA-CDA-IA(PR)* GCD-OA-GO(NY)
GQNQS-AUA-GH PTI-CDA-GA IP-CDA-IB GDA-UA-GO(NY)
GQNQI-AUA-GH PTS-CDA-GA IP-CDA-IB(WI)* G-TDA-HG(X)
GQNQJS-AUA-GH INI-CDA-GA IP-CDA-IB(MN)* G-401-IB (X/M)
GQNQJI-AUA-GH INS-CDA-GA I-CDA-HD G-CDA-IA(RPM/XC)
GQNQJC-AUA-GH PTI-CDA-GB I-CDA-HD(TX/S)* G-401-IB(X/M)
GQNQJC-AUA-GI INSBP-CDA-GE I-CDA-HD(A)* GTCC-HF
GQNQJI-AUA-GI TRPAI-CDA-GE PT-CDA-66A(NY) G-CDA-IA(RP)
GQNQS-AUA-GI TPRAS-CDA-GE PTI-CDA-GA(NY) IRA-CDA-IC
GQNQJS-AUA-GI DCAS-CDA-GE PTS-CDA-GA(NY) IP-CDA-IB(WA)
GQNQI-AUA-GI DRPAI-CDA-GE INI-CDA-GA(NY) G-CDA-ID(DC)
HR10-DUA-GI IHRIRS-CDA-GH INS-CDA-GA(NY) GIP-CDA-HB
HR10-DUA-GIA IHRIRI-CDA-GH PTI-CDA-GB(NY) IA-CDA-IA
HR10S-DUA-GI IQNQI-CDA-GH INSBP-CDA-GE(NY) G-CDA-IB(IR)
A001RP95
A007RC95
A020RV95
A027RV95
</TABLE>
(1) Contract for use in ME, OK, SC and TN only
(2) Contract for use in CT, IL and MT
(3) Contract for use in MN and MO
(4) State specific forms
A-2
<PAGE>
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and
Date Established by Board of Directors
- --------------------------------------
Separate Account Variable Life Account B was organized as a separate account of
the Company pursuant to authorization given by vote of the Company's Board of
Directors on June 18, 1986.
Contracts Funded by Separate Account
Variable Life Account B
38899 38899-90 38899-93 70180-93US 70182-93US 70181-94US
70225-95
A-3
<PAGE>
AGREEMENT
THIS AGREEMENT made by and between LEXINGTON MANAGEMENT CORPORATION
("LMC"), a Delaware corporation, and AETNA LIFE INSURANCE AND ANNUITY COMPANY
("AETNA"), a life insurance company organized under the laws of the State of
Connecticut, regarding LEXINGTON GOLD TRUST ("TRUST"), a to-be-organized
Massachusetts business trust, is as follows:
WHEREAS, TRUST is to be registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940 ("1940 Act") as an
open-end management investment company and its securities are to be registered
under the Securities Act of 1933 ("1933 Act");
WHEREAS, TRUST is to be used solely as a funding vehicle for variable
annuity and variable life insurance contracts offered by life insurance
companies through separate accounts of such life insurance companies; and
WHEREAS, AETNA has established Aetna Life Insurance and Annuity Company
Variable Annuity Account C, a separate account, and other separate accounts to
offer variable annuity and variable life contracts, and is desirous of having
TRUST serve as one of the funding vehicles for one or more such variable
contracts;
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained, it is hereby agreed by and between LMC and AETNA as follows:
1. LMC shall organize TRUST with investment objectives, policies, and
restrictions substantially identical to those of Lexington Goldfund, Inc.,
another open-end management investment company managed by LMC, except as such
objectives and policies may have to be modified to comply with applicable
insurance laws, and except that TRUST shall not do business with, or invest in
the securities of, any enterprise directly, or indirectly through one or more
affiliates engaged in any aspect of the mining, purchase, sale or processing of
precious minerals within the Republic of South Africa or doing business with any
such enterprise. LMC shall provide the necessary officers and trustees of TRUST
and shall take all steps necessary to register TRUST and its securities with the
Securities and Exchange Commission and in any states where such registration may
be required.
2. LMC shall act as investment adviser to TRUST for an annual fee,
payable monthly, of 1% of the average daily net assets of TRUST. LMC shall pay
to AETNA from this fee an annual amount, payable monthly, equal to .15% of the
average daily net assets of TRUST for certain administrative services to be
provided by AETNA. LMC shall not waive any portion of its fee without the
written consent of AETNA, and shall use its best efforts to keep its investment
advisory contract with TRUST in effect as required by the 1940 Act.
<PAGE>
LMC will promptly provide AETNA with copies of the minutes of all
proceedings of the Board of Trustees of TRUST, or any committee thereof,
together with all agreements presented at such meetings.
LMC will promptly provide AETNA with copies of all filings made with
the SEC pertaining to TRUST.
AETNA will promptly provide LMC with copies of all filings made with
the SEC pertaining to separate accounts for which the TRUST serves as a funding
vehicle.
3. TRUST will make its shares available at net asset value to the
separate account(s) designated by AETNA.
4. TRUST will not make its shares available to any other life insurance
company without the written consent of AETNA. However, future exclusivity of
TRUST will be subject to the attainment of certain asset growth targets to be
agreed upon by LMC and AETNA.
5. Orders for such shares shall be placed with the TRUST's custodian
pursuant to procedures which are then in effect and which may be modified from
time to time. TRUST will provide AETNA with documentation of all procedures in
effect when the offer and sale of TRUST shares0 0i1s to commence and will inform
AETNA of any modifications to such procedures.
6. LMC will diversify TRUST's investments in accordance with the
provisions of Section 817(h) of the Internal Revenue Code and the regulations
thereunder.
7. AETNA shall cause the contracts funded by TRUST shares to be
registered with the SEC under the 1933 Act and the separate account(s) to be
registered with the SEC as unit investment trust(s) under the 1940 Act to the
extent required by these laws, and shall file such documents and take such other
action as needed in order to comply with all requirements of the applicable
insurance laws in connection with the use of TRUST shares as funding vehicles.
8. Any materials used by AETNA which describe TRUST, its shares, or LMC
shall be submitted to LMC for approval prior to use. AETNA shall file any such
sales material with the National Association of Securities Dealers, Inc.
9. (a) AETNA shall be solely responsible for its actions in connection
with its use of TRUST and its shares and shall indemnify and hold harmless
TRUST, and LMC their officers, directors, and trustees from any liability,
including reasonable attorneys' fees, arising from AETNA's use of TRUST or its
shares.
(b) LMC shall be solely responsible for its actions in connection
with its management of TRUST and shall indemnify and hold harmless AETNA, its
officers and
2
<PAGE>
directors from any liability, including reasonable attorneys' fees, for its
negligent or wrongful acts or failures to act with respect to its management of
TRUST.
10. AETNA understands that LMC acts and will act in the future as
investment adviser to other investment companies. However, during 1989, LMC
will not, except as provided in contracts in effect prior to December 1, 1988,
act as an investment advisor to other gold or precious metal type investment
companies that may be sold in the Internal Revenue Code Section 457 or Section
403(b) markets.
11. If, after a presentation on the issue by AETNA, the Board of Trustees
of TRUST, or a majority of its disinterested Trustees, determines that a
material irreconcilable conflict exists, making it not in the best interest of
TRUST to continue to sell shares to AETNA, AETNA shall, at its own expense, take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, which steps may include, but are not limited to:
(a) withdrawing the assets allocable to the separate account(s) of
AETNA from TRUST and reinvesting such assets in a different investment medium
managed by LMC, or submitting to a vote of all affected contract owners the
questions of whether (i) withdrawal of assets from TRUST or (ii) segregation of
assets should be implemented and, as appropriate, withdrawing or segregating the
assets of any particular group that votes in favor of such withdrawal or
segregation, or offering to the affected contract owners the options of making
such a change;
(b) establishing a new registered open-end management investment
company or managed separate account managed by LMC.
For purposes hereof, the Board of Trustees, including a majority of the
disinterested Trustees, shall determine after further discussion with AETNA
whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event will LMC be required to establish a new
funding medium for any variable contracts. AETNA shall not be required by the
terms hereof to establish a new funding medium for any variable contracts if an
offer to do so has been declined by vote of a majority of affected contract
owners.
LMC will promptly make known to AETNA the Board of Trustees' consideration
or determination of the existence of a materiel irreconcilable conflict and its
implications.
12. AETNA shall provide pass-through voting privileges to all variable
contract owners to the extent required by the SEC. AETNA shall be responsible
for assuring that each of its separate accounts participating in TRUST
calculates voting privileges in a manner consistent with other life companies,
if any, using TRUST. AETNA will vote shares for which it has not received
voting instructions, as well as shares attributable to it, in the same
proportion as it votes shares for which it has received instructions.
3
<PAGE>
13. LMC and AETNA shall each bear its own expenses in connection with this
transaction; however, if AETNA decides not to make TRUST available as an
investment for its separate accounts, or if the assets of TRUST attributable to
AETNA's separate accounts shall not exceed $2 million within one year after the
first sale of TRUST to AETNA's separate accounts, or $10 million within two
years, or $30 million within three years, it shall reimburse LMC for all of its
out-of-pocket expenses incurred in connection with organizing and registering
TRUST, including advances on such expenses to TRUST, up to a maximum of $25,000.
14. (a) LMC shall provide TRUST with initial capital of $100,000.
(b) LMC shall pay all costs and expenses of such organization and
registration, and may be reimbursed by TRUST for such expenses to the extent
permitted under applicable securities laws. The TRUST will reimburse LMC for
such expenses to the extent permitted, beginning once the assets of the TRUST
exceed $20 million or the TRUST has completed one year of operation, whichever
is sooner. Such expenses will be amortized by the TRUST over a five year
period, unless a shorter amortization period is required by generally accepted
accounting principles.
15. This Agreement shall terminate automatically in the event of its
assignment.
16. This Agreement may be terminated at any time upon sixty (60) days'
written notice to the other party hereto, without the payment of any penalty.
17. This Agreement shall be subject to the provisions of the 1940 Act and
the rules and regulations thereunder, including any exemptive relief therefrom
and the orders of the Securities and Exchange Commission setting forth such
relief.
Executed this 1st day of December, 1988.
LEXINGTON MANAGEMENT CORPORATION
ATTEST: /s/ Lawrrence Kantor BY /s/ Robert De Michel
---------------------- ----------------------
Chairman
AETNA LIFE INSURANCE AND ANNUITY
COMPANY
ATTEST: /s/ Jesse Zygiel BY /s/ Thomas West
---------------------- ----------------------
Senior Vice President
4
<PAGE>
AMENDMENT TO AGREEMENT
The Agreement dated December 1, 1988 between Lexington management Corporation
and AETNA Life Insurance and Annuity Company regarding Lexington Gold Trust is
hereby amended as follows:
PARAGRAPH 2.
2. LMC shall act as investment adviser to TRUST for an annual fee,
payable monthly, of 1% of the average daily net assets of TRUST. LMC shall use
its best efforts to keep its investment advisory contract with TRUST in effect
as required by the 1940 Act.
LMC will promptly provide AETNA with copies of the minutes of all
proceedings of the Board of Trustees of TRUST, or any committee thereof,
together with all agreements presented at such meetings.
LMC will promptly provide AETNA with copies of all filings made with
the SEC pertaining to TRUST.
AETNA will promptly provide LMC with copies of all filings made with
the SEC pertaining to separate accounts for which the TRUST serves as a funding
vehicle.
Executed this 11TH day of FEBRUARY 1991.
--------------------- ------------------
LEXINGTON MANAGEMENT CORPORATION
ATTEST: /s/ Lisa Curcio BY /s/ Jonathan Katz
----------------------- ---------------------------------
AETNA LIFE INSURANCE AND ANNUITY
COMPANY
ATTEST: /s/ Jessie Zygiel BY /s/ Thomas West
------------------------- ---------------------------------
5
<PAGE>
AGREEMENT
THIS AGREEMENT is made by and between ADVISERS MANAGEMENT TRUST ("TRUST"),
a Massachusetts business trust, and Aetna Life Insurance and Annuity Company
(the "LIFE COMPANY"), a life insurance company organized under the laws of the
State of Connecticut.
WHEREAS, TRUST is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 (" '40 Act") as an open-end diversified
management investment company; and
WHEREAS, TRUST is organized as a series fund, currently with four
Portfolios: Liquid Asset Portfolio, Limited Maturity Bond Portfolio, Growth
Portfolio, and Balanced Portfolio; and
WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable contracts offered by life insurance companies through separate accounts
of such life insurance companies; and
WHEREAS, LIFE COMPANY has or will establish one or more separate accounts
to offer variable annuity and variable life insurance contracts and is desirous
of having TRUST as an underlying funding vehicle for such variable contracts.
NOW, THEREFORE, it is hereby agreed by and between TRUST and LIFE COMPANY
as follows:
1. TRUST will make available to the designated separate accounts of LIFE
COMPANY shares of the Growth Portfolio for investment of purchase payments in
variable contracts allocated to the designated separate accounts.
2. TRUST will make the shares available to such separate accounts at net
asset value next computed after receipt of each order by the TRUST.
3. Orders shall be placed for such shares with the TRUST's custodian
pursuant to procedures which are then in effect and which may be modified from
time to time. TRUST will provide LIFE COMPANY with documentation of all
procedures now in effect and will undertake to inform LIFE COMPANY of any
modifications to such procedures.
4. TRUST will provide LIFE COMPANY camera ready copy of the current TRUST
prospectus and any supplements thereto for printing by LIFE COMPANY. TRUST will
provide LIFE COMPANY a copy of the statement of additional information suitable
for duplication. TRUST will provide LIFE COMPANY camera ready copy of its proxy
material suitable for printing. TRUST will provide LIFE COMPANY annual and
semi-annual reports and any supplements thereto, in camera ready form.
<PAGE>
5. Any materials utilized by LIFE COMPANY which describe TRUST, its
shares, or its adviser shall be submitted to TRUST and its adviser and
distributor, Neuberger & Berman Management Incorporated, for approval prior to
use.
6. LIFE COMPANY shall be solely responsible for its actions in connection
with its use of TRUST and its shares and shall indemnify and hold harmless
TRUST, its officers and Trustees, and its adviser and distributor, Neuberger &
Berman Management Incorporated and its officers and directors from any liability
arising from LIFE COMPANY's use of TRUST or its shares. LIFE COMPANY shall
exonerate TRUST, its officers and Trustees, and its adviser and distributor,
Neuberger & Berman Management Incorporated and its officers and directors for
any use by LIFE COMPANY of the TRUST or its shares.
7. LIFE COMPANY and its agents will not make any representations
concerning the TRUST or TRUST shares except those contained in the then current
prospectus of the TRUST and in current printed sales literature of the TRUST.
8. LIFE COMPANY agrees to inform the Board of Trustees of TRUST of the
existence of or any known potential for any material irreconcilable conflict of
interest between the interests of the contract owners of the separate accounts
of LIFE COMPANY investing in the TRUST and/or any other separate account of any
other insurance company investing in the Trust.
Any material irreconcilable conflict may arise for a variety of reasons,
including:
(a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or securities
laws or regulations, or a public ruling, private letter ruling, or any
similar action by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Portfolio are being
managed;
(e) a difference in voting instructions given by variable annuity contract
owners and variable life insurance contract owners or by contract
owners of different life insurance companies utilizing TRUST; or
(f) a decision by LIFE COMPANY to disregard the voting instructions of
contract owners.
2
<PAGE>
LIFE COMPANY will be responsible for assisting the Board of Trustees of
TRUST in carrying out its responsibilities by providing the Board with all
information reasonably necessary for the Board to consider any issue raised
including information as to a decision by LIFE COMPANY to disregard voting
instructions of contract owners.
It is agreed that if it is determined by a majority of the members of the
Board of Trustees of TRUST or a majority of its disinterested Trustees that a
material irreconcilable conflict exists affecting LIFE COMPANY, LIFE COMPANY
shall, at its own expense, take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, which steps may include, but are
not limited to,
(a) withdrawing the assets allocable to some or all of the separate
accounts from TRUST or any Portfolio and reinvesting such assets in a
different investment medium, including another Portfolio of the TRUST
or submitting the questions of whether such segregation should be
implemented to a vote of all affected contract owners and, as
appropriate, segregating the assets of any particular group (i.e.
annuity contract owners, life insurance contract owners or qualified
contract owners) that votes in favor of such segregation, or offering
to the affected contract owners the option of making such a change;
(b) establishing a new registered management investment company or managed
separate account;
(c) LIFE COMPANY taking any action consistent with its separate account
prospectus.
If a material irreconcilable conflict arises because of LIFE COMPANY's
decision to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the LIFE
COMPANY may be required, at the TRUST's election, to withdraw its separate
account's investment in TRUST. No charge or penalty will be imposed against a
separate account as a result of such a withdrawal. LIFE COMPANY agrees that any
remedial action taken by it in resolving any material conflicts of interest will
be carried out primarily with a view to the interests of contract owners.
For purposes hereof, a majority of the disinterested members of the Board
of Trustees of TRUST shall determine whether or not any proposed action
adequately remedies any material irreconcilable conflict. In no event will
TRUST be required to establish a new funding medium for any variable contracts.
LIFE COMPANY shall not be required by the terms hereof to establish a new
funding medium for any variable contracts if an offer to do so has been declined
by vote of a majority of affected contract owners.
TRUST will undertake to promptly make known to LIFE COMPANY the Board of
Trustees' determination of the existence of a material irreconcilable conflict
and its implications.
3
<PAGE>
9. LIFE COMPANY shall provide pass-through voting privileges to all
variable contract owners so long as the Securities and Exchange Commission
continues to interpret the 140 Act to require such pass-through voting
privileges for variable contract owners. LIFE COMPANY shall be responsible for
assuring that each of its separate accounts participating in TRUST calculates
voting privileges in a manner consistent with instructions received from TRUST
regarding the practices of the other life companies utilizing TRUST. It is a
condition of this Agreement that LIFE COMPANY will vote shares for which it has
not received voting instructions as well as shares attributable to it in the
same proportion as it votes shares for which it has received instructions.
10. This Agreement shall terminate automatically in the event of its
assignment unless made with the written consent of LIFE COMPANY and TRUST.
11. This Agreement may be terminated at any time on 60 days' written
notice to the other party hereto, without the payment of any penalty.
12. This Agreement shall be subject to the provisions of the 140 Act and
the rules and regulations thereunder, including any exemptive relief therefrom
and the orders of the Securities and Exchange Commission setting forth such
relief.
13. It is understood by the parties that this Agreement is not to be
deemed an exclusive arrangement.
Executed this 14th day of April, 1989.
ADVISERS MANAGEMENT TRUST
ATTEST: /s/ By: /s/ Stanley Egener
---------------------- -------------------------
Stanley Egener, Chairman
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
ATTEST: /s/ By: /s/ Thomas L. West, Jr.
---------------------- -------------------------
Thomas L. West. Jr.
Senior Vice President
4
<PAGE>
ASSIGNMENT AND MODIFICATION AGREEMENT
This Agreement is made by and between Neuberger & Berman Advisers
Management Trust ("Trust"), a Massachusetts business trust, Neuberger & Berman
Management Incorporated ("N&B Management"), a New York corporation, Neuberger &
Berman Advisers Management Trust ("Successor Trust"), a Delaware business trust,
Advisers Managers Trust ("Managers Trust") and Aetna Life Insurance and Annuity
Company ("Life Company"), a life insurance company organized under the laws of
the State of Connecticut.
WHEREAS, the Life Company has previously entered into a Sales Agreement
dated April 14, 1989 (the "Sales Agreement") with the Trust regarding the
purchase of shares of the Trust by Life Company; and
WHEREAS, as part of the reorganization into a "master-feeder" fund
structure (the "Reorganization"), the Trust will be converted into the Successor
Trust, a Delaware business trust; and
WHEREAS, as part of the Reorganization, each Portfolio of the Trust will
transfer all of its assets to the corresponding Portfolio of the Successor Trust
("Successor Portfolio") and each Successor Portfolio will invest all of its net
investable assets in a corresponding series of Managers Trust; and
WHEREAS, as part of the Reorganization, an Order under Section 6(c) of the
Investment Company Act of 1940 ("40 Act") is expected to be issued by the
Securities and Exchange Commission ("SEC") granting exemptions from Sections
9(a), 13(a), 15(a) and 15(b) of the '40 Act and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder; and
WHEREAS, the Order is expected to require that certain conditions (the
"Conditions") as set forth in the Notice (Investment Company Act Release No.
21003 (April 12, 1995)) be made a part of the Sales Agreement; and
WHEREAS, the parties hereto desire to assign the Sales Agreement from the
Trust to the Successor Trust, to modify the Sales Agreement to include the
Conditions and to rename the Sales Agreement; and
WHEREAS, N&B Management and Managers Trust will become parties to the Sales
Agreement as modified hereby, due to and for purposes of their obligations under
the Conditions.
NOW THEREFORE, in consideration of their mutual promises, Trust, N&B
Management, Successor Trust, Managers Trust and Life Company agree as follows:
1. The Sales Agreement is hereby assigned by the Trust to the Successor
Trust.
5
<PAGE>
2. Pursuant to such assignment, the Successor Trust hereby accepts all
rights and benefits of the Trust under the Sales Agreement and agrees to perform
all duties and obligations of the Trust under the Sales Agreement. Upon the
effectiveness of this Assignment and Modification Agreement, the Trust will be
released from all obligations and duties under the Sales Agreement.
3. The Sales Agreement is hereby modified to include the Conditions as
follows:
Sections 8 and 9 of the Sales Agreement are replaced by the following:
8. a) The Board of Trustees of each of the Successor Trust and
Managers Trust (the "Boards") will monitor the Successor Trust and Managers
Trust, respectively, (collectively the "Funds") for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all insurance company separate accounts investing in the Funds. A material
irreconcilable conflict may arise for a variety of reasons, including: (a)
state insurance regulatory authority action; (b) a change in applicable federal
or state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of the Funds are
being managed; (e) a difference in voting instructions given by variable annuity
and variable life insurance contract owners or by contract owners of different
participating insurance companies; or (f) a decision by a participating
insurance company to disregard voting instructions of contract owners.
b) Life Company, other participating insurance companies, N&B
Management (or any other manager or administrator of the Funds), and any
qualified pension and retirement plan that executes a fund participation
agreement upon becoming an owner of 10% or more of the assets of the Funds
(collectively, "Participants") will report any potential or existing conflicts
to the Boards. Participants will be responsible for assisting the appropriate
Board in carrying out its responsibilities under these Conditions by providing
the Board with all information reasonably necessary for it to consider any
issues raised. This responsibility includes, but is not limited to, an
obligation by each Participant to inform the Board whenever variable contract
owner voting instructions are disregarded. These responsibilities will be
carried out with a view only to the interests of the contract owners.
c) If a majority of the Board of a Fund or a majority of its
disinterested trustees or directors, determines that a material irreconcilable
conflict exists, the relevant Participant, at its expense and to the extent
reasonably practicable (as determined by a majority of disinterested trustees or
directors), will take any steps necessary to remedy or eliminate the
irreconcilable material conflict, including: (a) withdrawing the assets
allocable to some or all of the separate accounts from the Funds or any series
thereof and reinvesting those assets in a different investment medium, which may
include another series of the Successor Trust or Managers Trust, or another
6
<PAGE>
investment company or submitting the question as to whether such segregation
should be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., variable
annuity or variable annuity contract owners of one or more Participants) that
votes in favor of such segregation, or offering to the affected variable
contract owners the option of making such a change; and (b) establishing a new
registered management investment company or managed separate account. If a
material irreconcilable conflict arises because of a Participant's decision to
disregard contract owner voting instructions, and that decision represents a
minority position or would preclude a majority vote, the Participant may be
required, at the election of the relevant Fund, to withdraw its separate
account's investment in such Fund, and no charge or penalty will be imposed as a
result of such withdrawal.
The responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and to bear the cost of
such remedial action shall be a contractual obligation of all Participants under
their agreements governing their participation in the Funds. The responsibility
to take such remedial action shall be carried out with a view only to the
interests of the contract owners.
For the purposes of Condition (c), a majority of the disinterested members
of the applicable Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the relevant Fund or N&B Management (or any other investment adviser of the
Funds) be required to establish a new funding medium for any variable contract.
Further, no Participant shall be required by this condition (c) to establish a
new funding medium for any variable contract if any offer to do so has been
declined by a vote of a majority of contract owners materially affected by the
irreconcilable material conflict.
d) Any Board's determination of the existence of an
irreconcilable material conflict and its implications shall be made known
promptly and in writing to all Participants.
9. a) Participants will provide pass-through voting privileges to
all contract owners so long as the SEC continues to interpret the '40 Act as
requiring pass-through voting privileges for variable contract owners. This
condition will apply to UIT-separate accounts investing in the Successor Trust
and to managed separate accounts investing in Managers Trust to the extent a
vote is required with respect to matters relating to Managers Trust.
Accordingly, the Participants, where applicable, will vote shares of a Fund held
in their separate accounts in a manner consistent with voting instructions
timely received from variable contract owners. Participants will be responsible
for assuring that each of their separate accounts that participates in the Funds
calculates voting privileges in a manner consistent with other Participants.
The obligation to calculate voting privileges in a manner consistent with all
other separate accounts investing in the Funds will be a contractual obligation
of all Participants under the agreements governing participation in the Funds.
Each Participant will vote shares for
7
<PAGE>
which it has not received timely voting instructions, as well as shares it owns,
in the same proportion as its votes those shares for which it has received
voting instructions.
b) If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
'40 Act or the rules thereunder with respect to mixed and shared funding on
terms and conditions materially different from any exemptions granted in the
order requested, then the Successor Trust, Managers Trust and/or the
Participants, as appropriate, shall take such steps as may be necessary to
comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3, as adopted,
to the extent such Rules are applicable.
c) No less than annually, the Participants shall submit to the
Boards such reports, materials or data as such Boards may reasonably request so
that the Boards may fully carry out the obligations imposed upon them by these
Conditions. Such reports, materials, and data shall be submitted more
frequently if deemed appropriate by the applicable Boards.
4. The Sales Agreement is hereby modified to include indemnification as
follows:
22. (a) Except as limited by and in accordance with the provisions
of Sections 22(b) and 22(c) hereof, N&B MANAGEMENT agrees to indemnify and hold
harmless LIFE COMPANY and each of its directors and officers and each person, if
any, who controls LIFE COMPANY within the meaning of Section 15 of the '33 Act
(collectively, the "Indemnified Parties") against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of N&B MANAGEMENT, which consent shall not be unreasonably withheld) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of
TRUST's shares or the variable contracts or exercise of rights with respect to
such shares or contracts, and arise as a result of failure by Trust to comply
with the diversification requirements of Section 817(h) of the Code.
(b) N&B Management shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to LIFE COMPANY.
(c) N&B MANAGEMENT shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified N&B MANAGEMENT in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such
8
<PAGE>
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify N&B MANAGEMENT of any such claim shall not relieve
N&B MANAGEMENT from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, N&B MANAGEMENT shall be entitled to participate at its own
expense in the defense thereof. N&B MANAGEMENT also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the action.
After notice from N&B MANAGEMENT to such party of N&B MANAGEMENT's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and N&B MANAGEMENT will not
be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
5. The Sales Agreement shall be renamed Fund Participation Agreement.
6. This Assignment and Modification Agreement shall be effective on May
1, 1995, the closing date of the conversion. In the event of a conflict between
the terms of this Assignment and Modification Agreement and the terms of the
Sales Agreement, the terms of this Assignment and Modification Agreement shall
control.
7. All other terms and conditions of the Sales Agreement remain in full
force and effect.
Executed this 1st day of May, 1995.
Neuberger & Berman Advisers
Management Trust
(a Massachusetts business trust)
Attest: /s/ Claudia A. Brandon By: /s/ Stanley Egener
- --------------------------------------------------------------------------------
Claudia A. Brandon Stanley Egener, Chairman
Neuberger & Berman Advisers
Management Trust
(a Delaware business trust)
Attest: /s/ Claudia A. Brandon By: /s/ Stanley Egener
- --------------------------------------------------------------------------------
Claudia A. Brandon Stanley Egener, Chairman
9
<PAGE>
Advisers Managers Trust
Attest: /s/ Claudia A. Brandon By: /s/ Stanley Egener
- --------------------------------------------------------------------------------
Claudia A. Brandon Stanley Egener, Chairman
Neuberger & Berman Management
Incorporated
Attest: /s/ Ellen Metzger By: /s/Alan Dynner
- --------------------------------------------------------------------------------
Ellen Metzger Alan Dynner
Aetna Life Insurance and Annuity Company
Attest: /s/ Patricia Reid Rup By: /s/ James C. Hamilton
- --------------------------------------------------------------------------------
Patricia Reid Rup James C. Hamilton
10
<PAGE>
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (the "Agreement") made by and between SCUDDER
VARIABLE LIFE INVESTMENT FUND (the "Fund"), a Massachusetts business trust
created under a Declaration of Trust dated March 15, 1985, as amended, with a
principal place of business in Boston, Massachusetts and AETNA LIFE INSURANCE
AND ANNUITY COMPANY, a Connecticut corporation (the "Company"), with a principal
place of business in Hartford, Connecticut on behalf of the Variable Annuity
Account C, (the "Account"), a separate account of the Company.
WHEREAS, the Fund acts as the investment vehicle for the separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively referred to herein as "Variable Insurance Products") to be offered
by insurance companies which have entered into participation agreements
substantially identical to this Agreement ("Participating Insurance Companies")
and their affiliated insurance companies; and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares of beneficial interest ("Shares"), and additional series of Shares may
be established, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities; and
WHEREAS, it is in the best interest of Participating Insurance Companies to
make capital contributions if required so that the annual expenses of each
Portfolio of the Fund in which a Participating Insurance Company is a
shareholder will not exceed a fixed percentage of the Portfolio's average annual
net assets; and
WHEREAS, the Parties desire to evidence their agreement as to certain other
matters,
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereto agree as follows:
1. ADDITIONAL DEFINITIONS.
For the purposes of this Agreement, the following definitions shall apply:
(a) The "expenses of a Portfolio" for any fiscal year shall mean the
expenses for such fiscal year as shown in the Statement of
Operations (or similar report) certified by the Fund's
independent public accountants;
(b) A "Portfolio's average daily net assets" for each fiscal year
shall mean the sum of the net asset values determined throughout
the year for the purpose of determining net asset value per Share,
divided by the number of such determinations during such year;
<PAGE>
(c) The Company's "Required Contribution" on behalf of the Account in
respect of a Portfolio for any fiscal year shall mean an amount
equal to the expenses of that Portfolio for such year minus the
below-indicated percentage of that Portfolio's average daily net
assets for the year:
Managed International Portfolio..............................1.5%
Each other Portfolio........................................0.75%
multiplied by a fraction the denominator of which is the average
daily net assets of that Portfolio and the numerator of which is
the average daily net asset value of the Shares of that Portfolio
owned by the Account (referred to herein as a "Participating
Shareholder"). The Company's Required Contribution in respect of
a Portfolio shall be pro-rated based on the number of business
days on which this Agreement is in effect for periods of less
than a fiscal year.
(d) The "average daily net asset value of the Shares of the
Portfolio" owned by the Account for any fiscal year of the Fund
shall mean the greater of (i) $500,000 or (ii) the sum of the
aggregate net values of the Shares so owned determined during the
fiscal year, as of each determination of the net asset value per
Share, divided by the total number of determinations of
net asset value during such year.
(e) "Shares" means shares of beneficial interest, without par value,
of any Portfolio, now or hereafter created, of the Fund.
2. CAPITAL CONTRIBUTION.
The Company on behalf of the Account shall, within sixty days after the end
of each fiscal year of the Fund, make a capital contribution to the Fund in
respect of each Portfolio equal to the Required Contribution for that Portfolio
for such year; provided, however, that in the event that both clauses (i) and
(ii) of paragraph (d) of Section 1 of this Agreement or similar agreements are
applicable to different Participating Insurance Companies during the same fiscal
year, there shall be a proportionate reduction of the Required Contribution of
each Participating Insurance Company to which said clause (ii) is applicable so
that the total of all required capital contributions to the Fund on behalf of
any Portfolio is not greater than the excess of the expenses of that Portfolio
for that fiscal year less the percentage of that Portfolio's total expenses set
forth in paragraph (c) of Section 1 of this Agreement for such fiscal year.
2
<PAGE>
3. DUTY OF FUND TO SELL.
The Fund shall make its Shares available for purchase at the applicable net
asset value per Share by Participating Insurance Companies and their affiliates
and separate accounts on those days on which the Fund calculates its net asset
value pursuant to rules of the Securities and Exchange Commission; provided,
however, that the Trustees of the Fund may refuse to sell Shares of any
Portfolio to any person, or suspend or terminate the offering of Shares of any
Portfolio, if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Trustees, necessary in the
best interest of the shareholders of any Portfolio.
4. REQUIREMENT TO EXECUTE PARTICIPATION AGREEMENT; REQUESTS.
Each Participating Insurance Company shall, prior to purchasing Shares in
the Fund, execute and deliver a participation agreement in a form substantially
identical to this Agreement.
The Fund shall make available, upon written request from the Participating
Insurance Company given in accordance with Paragraph 10, to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 8 (i) a list of all other Participating
Insurance Companies, and (ii) a copy of the Agreement as executed by any other
Participating Insurance Company.
The Fund shall also make available upon request to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 8, the net asset value of any Portfolio of
the Fund as of any date upon which the Fund calculates the net asset value of
its Portfolios for the purpose of purchase and redemption of Shares.
5. INDEMNIFICATION.
The Company agrees to indemnify and hold harmless the Fund and each of its
Trustees and officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933 (the "Act") against any and
all losses, claims, damages, liabilities or litigation (including legal and
other expenses), arising out of the acquisition of any Shares by any person, to
which the Fund or such Trustees, officers or controlling person may become
subject under the Act, under any other statute, at common law or otherwise,
which (i) may be based upon any wrongful act by the Company, any of its
employees or representatives, any affiliate of or any person acting on behalf of
the Company or a principal underwriter of its insurance products, or (ii) may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering Shares or any
amendment thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if
3
<PAGE>
such a statement or omission was made in reliance upon information furnished to
the Fund by the Company, or (iii) may be based on any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or prospectus covering insurance products sold by the Company or any
insurance company which is an affiliate thereof, or any amendments or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, unless such statement or omission was made in reliance
upon information furnished to the Company or such affiliate by or on behalf of
the Fund; provided, however, that in no case (i) is the Company's indemnity in
favor of a Trustee or officer or any other person deemed to protect such Trustee
or officer or other person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties or by reason of his reckless
disregard of obligations and duties under this Agreement or (ii) is the Company
to be liable under its indemnity agreement contained in this Paragraph 5 with
respect to any claim made against the Fund or any person indemnified unless the
Fund or such person, as the case may be, shall have notified the Company in
writing pursuant to Paragraph 10 within a reasonable time after the summons or
other first legal process giving information of the nature of the claims shall
have served upon the Fund or upon such person (or after the Fund or such person
shall have received notice of such service on any designated agent), but failure
to notify the Company of any such claim shall not relieve the Company from any
liability which it has to the Fund or any person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
Paragraph 5. The Company shall be entitled to participate, at its own expense,
in the defense, or, if it so elects, to assume the defense of any suit brought
to enforce any such liability, but, if it elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the Fund,
to its officers and Trustees, or to any controlling person or persons, defendant
or defendants in the suit. In the event that the Company elects to assume the
defense of any such suit and retain such counsel, the Fund, such officers and
Trustees or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them,
but, in case the Company does not elect to assume the defense of any such suit,
the Company will reimburse the Fund, such officers and Trustees or controlling
person or persons, defendant or defendants in such suit, for the reasonable fees
and expenses of any counsel retained by them. The Company agrees promptly to
notify the Fund pursuant to Paragraph 10 of the commencement of any litigation
or proceedings against it in connection with the issue and sale of any Shares.
The Fund agrees to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the Act against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
it or such directors, officers or controlling person may become subject under
the Act, under any other statute, at common law or otherwise, arising out of the
acquisition of any Shares by any person which (i) may be based upon any wrongful
act by the Fund, any of its employees or representatives or a principal
underwriter of the Fund, or (ii) may be based upon any untrue statement or
4
<PAGE>
alleged untrue statement of a material fact contained in a registration
statement or prospectus covering Shares or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading unless such statement or omission was made in reliance upon
information furnished to the Fund by the Company or (iii) may be based on any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering insurance products sold by the
Company, or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to the
Company by or on behalf of the Fund; provided, however, that in no case (i) is
the Fund's indemnity in favor of a director or officer or any other person
deemed to protect such director or officer or other person against any liability
to which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of obligations and duties under this
Agreement or (ii) is the Fund to be liable under its indemnity agreement
contained in this Paragraph 5 with respect to any claims made against the
Company or any such director, officer or controlling person unless it or such
director, officer or controlling person, as the case may be, shall have notified
the Fund in writing pursuant to Paragraph 10 within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon it or upon such director, officer or
controlling person (or after the Company or such director, officer or
controlling person shall have received notice of such service on any designated
agent), but failure to notify the Fund of any claim shall not relieve it from
any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
Paragraph. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any sub liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Company, its directors, officers or controlling person or persons, defendant or
defendants, in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Company, its directors, officers or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Company or such directors, officers or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Fund agrees promptly to notify
the Company pursuant to Paragraph 10 of the commencement of any litigation or
proceedings against it or any of its officers or Trustees in connection with the
issuance or sale of any Shares.
6. PROCEDURE FOR RESOLVING IRRECONCILABLE CONFLICTS.
(a) The Trustees of the Fund will monitor the operations of the
Fund for the existence of any material irreconcilable
conflict among the interests of all
5
<PAGE>
the contractholders and policyowners of Variable Insurance
Products (the "Participants") of all separate accounts
investing in the Fund. An irreconcilable material conflict
may arise, among other things, from: (a) an action by any
state insurance regulatory authority; (b) a change in
applicable insurance laws or regulations; (c) a tax ruling
or provision of the Internal Revenue Code or the regulations
thereunder; (d) any other development relating to the tax
treatment of insurers, contractholders or policyowners or
beneficiaries of Variable Insurance Products; (e) the manner
in which the investments of any Portfolio are being managed;
(f) a difference in voting instructions given by variable
annuity contractholders, on the one hand, and variable life
insurance policyowners, on the other hand, or by the
contractholders or policyowners of different participating
insurance companies; or (g) a decision by an insurer to
override the voting instructions of Participants.
(b) The Company will be responsible for reporting any potential
or existing conflicts to the Trustees of the Fund. The
Company will be responsible for assisting the Trustees in
carrying out their responsibilities under this Paragraph
6(b) and Paragraph 6(a), by providing the Trustees with all
information reasonably necessary for the Trustees to
consider the issues raised. The Fund will also request its
investment adviser to report to the Trustees any such
conflict which comes to the attention of the adviser.
(c) If it is determined by a majority of the Trustees of the
Fund, or a majority of its disinterested Trustees, that a
material irreconcilable conflict exists involving the
Company, the Company shall, at its expense, and to the
extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take whatever steps are
necessary to eliminate the irreconcilable material conflict,
including withdrawing the assets allocable to some or all of
the separate accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium,
including another Portfolio of the Fund, offering to the
affected Participants the option of making such a change or
establishing a new funding medium including a registered
investment Company.
For purposes of this Paragraph 6(c), the Trustees, or the
disinterested Trustees, shall determine whether or not any
proposed action adequately remedies any irreconcilable
material conflict. In the event of a determination of the
existence of an irreconcilable material conflict, the
Trustees shall cause the Fund to take such action, such as
the establishment of one or more additional Portfolios, as
they in their sole discretion determine to be in the
interest of all shareholders and Participants in view of all
applicable factors, such as cost, feasibility, tax,
regulatory and other considerations. In no event will the
Fund be
6
<PAGE>
required by this Paragraph 6(c) to establish a new funding
medium for any variable contract or policy.
The Company shall not be required by this Paragraph 6(c) to
establish a new funding medium for any variable contract or
policy if an offer to do so has been declined by a vote of a
majority of the Participants materially adversely affected
by the material irreconcilable conflict. The Company will
recommend to its Participants that they decline an offer to
establish a new funding medium only if the Company believes
it is in the best interest of the Participants.
(d) The Trustees' determination of the existence of an
irreconcilable material conflict and its implications
promptly shall be communicated to all Participating
Insurance Companies by written notice thereof delivered or
mailed, first class postage prepaid.
7. VOTING PRIVILEGES.
The Company shall be responsible for assuring that its separate account or
accounts participating in the Fund shall use a calculation method of voting
procedures substantially the same as the following: those Participants
permitted to give instructions and the number of Shares for which instructions
may be given will be determined as of the record date for the Fund shareholders'
meeting, which shall not be more than 60 days before the date of the meeting.
Whether or not voting instructions are actually given by a particular
Participant, all Fund shares held in any separate account or sub-account thereof
and attributable to policies will be voted for, against, or withheld from voting
on any proposition in the same proportion as (i) the aggregate record date cash
value held in such sub-account for policies giving instructions, respectively,
to vote for, against, or withhold votes on such proposition, bears to (ii) the
aggregate record date cash value held in the sub-account for all policies for
which voting instructions are received. Participants continued in effect under
lapse options will not be permitted to give voting instructions. Shares held in
any other insurance company general or separate account or sub-account thereof
will be voted in the proportion specified in the second preceding sentence for
shares attributable to policies.
8. DURATION AND TERMINATION.
This Agreement shall remain in force for the period ending five years from
the date of its execution (such date and any anniversary of such date being
hereinafter called a "Renegotiation Date"), and from year to year thereafter
provided that neither the Company nor the Fund shall have given written notice
to the other within thirty (30) days prior to a Renegotiation Date that it
desires to renegotiation the amount of contribution to capital due hereunder
("Renegotiation Notice"). If a Renegotiation Notice is properly given as
aforesaid and the Fund and the Company shall fail, within sixty (60) days after
the Renegotiation Date, either to enter into an amendment to this Agreement or a
written
7
<PAGE>
acknowledgment that the Agreement shall continue in effect, this Agreement shall
terminate as of the one hundred twentieth day after such Renegotiation Date. If
this Agreement is so terminated, the Fund may, at any time thereafter,
automatically redeem the Shares of any Portfolio held by a Participating
Shareholder. This Agreement may be terminated at any time, at the option of
either of the Company or the Fund, when neither the Company, any insurance
company nor the separate account or accounts of such insurance company which is
an affiliate thereof which is not a Participating Insurance Company own any
Shares of the Fund or may be terminated by either party to the Agreement upon a
determination by a majority of the Trustees of the Fund, or a majority of its
disinterested Trustees, following certification thereof by a Participating
Insurance Company given in accordance with Paragraph 10 that an irreconcilable
conflict exists among the interests of (i) all contractholders and policyholders
of Variable Insurance Products of all separate accounts or (ii) the interests of
the Participating Insurance Companies investing in the Fund. Notwithstanding
anything to the contrary in this Agreement or its termination as provided
herein, the Company's obligation to make a capital contribution to the Fund in
accordance with this Agreement at the time in effect shall continue (i)
following a properly given Renegotiation Notice, in the absence of agreement
otherwise, until termination of this Agreement, and (ii) (except termination due
to the existence of an irreconcilable conflict), following termination of this
Agreement, until the later of the fifth anniversary of the date of this
Agreement or the date on which the Company, its separate account(s) or the
separate account(s) of any affiliated insurance company owns no Shares.
9. COMPLIANCE.
The Fund will comply with the provisions of Section 4240(a) of the New York
Insurance Law.
Each Portfolio of the Fund will comply with the provisions of Section
817(h) of the Internal Revenue Code of 1986, as amended (the "Code"), relating
to diversification requirements for variable annuity, endowment and life
insurance contracts. Specifically, each Portfolio will comply with either (i)
the requirement of Section 817(h)(1) of the Code that its assets be adequately
diversified, or (ii) the "Safe Harbor for Diversification" specified in Section
817(h)(2) of the Code, or (iii) the diversification requirement of Section
817(h)(1) of the Code by having all or part of its assets invested in U.S.
Treasury securities which qualify for the "Special Rule for Investments in
United States Obligations" specified in Section 817(h)(3) of the Code.
The provisions of Paragraphs 6 and 7 of this Agreement shall be interpreted
in a manner consistent with any Rule or order of the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, applicable to
the parties hereto.
No Shares of any Portfolio of the Fund may be sold to the general public.
8
<PAGE>
10. NOTICES.
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Scudder Variable Life Investment Fund
175 Federal Street
Boston, Massachusetts 02110
(617) 482-3990
Attn: David B. Watts
If to the Company:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4C
Hartford, Connecticut 06156
Attn: George Gingold, Esq. and T. Joseph Thornton
11. MASSACHUSETTS LAW TO APPLY.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
12. MISCELLANEOUS.
The name "Scudder Variable Life Investment Fund" is the designation of the
Trustees for the time being under a Declaration of Trust dated March 15, 1985,
as amended, and all persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund. No Portfolio
shall be liable for any obligations properly attributable to any other
Portfolio.
The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which taken together shall
constitute one and the same instrument.
9
<PAGE>
13. ENTIRE AGREEMENT.
This Agreement incorporates the entire understanding and agreement among
the parties hereto, and supersedes any and all prior understandings and
agreements between the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the 27th day of April, 1995.
SEAL SCUDDER VARIABLE LIFE
INVESTMENT FUND
By: /S/ David S. Lee
------------------------------
Vice President
SEAL AETNA INSURANCE COMPANY
OF AMERICA
By: /S/ Thomas L. West
------------------------------
Its: Senior Vice President
10
<PAGE>
FIRST AMENDMENT TO
FUND PARTICIPATION AGREEMENT
This first amendment, executed as of the 19th day of February, 1993, is by and
between Aetna Life Insurance and Annuity Company (the "Company") and Scudder
Variable Life Investment Fund (the "Fund").
WHEREAS, the Company and the Fund are parties to a Fund Participation Agreement
(the "Agreement") dated April 27, 1992; and
WHEREAS, the Company and the Fund now desire to modify the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
promises expressed herein, the parties agree as follows:
1. The parties agree that shares of the Scudder Variable Life Investment
Fund - Managed International Portfolio shall be made available to
serve as an underlying investment medium for Aetna Life Insurance
and Annuity Company Variable Life Account B for variable life
insurance contracts ("Variable Life Contracts") of the Company.
2. The opening paragraph of the Agreement is hereby amended as follows:
PARTICIPATION AGREEMENT (the "Agreement") made by and between SCUDDER
VARIABLE LIFE INVESTMENT FUND (the "Fund"), a Massachusetts business
trust created under a Declaration of Trust dated March 15, 1985, as
amended, with a principal place of business in Boston, Massachusetts
and Aetna Life Insurance and Annuity Company, a Connecticut
corporation (The "Company"), with a principal place of business in
Hartford, Connecticut on behalf of the Company's Variable Life Account
B and Variable Annuity Account C (the "Accounts"), separate accounts of
the Company.
3. All references in the Agreement to the defined term "Accounts" shall
be deemed to include Variable Life Account B and Variable Annuity
Account C.
4. In the event that there is any conflict between the terms of this
First Amendment and the Agreement, it is the intention of the parties
hereto that the terms of this First Amendment shall control, and the
Agreement shall be interpreted on that basis. To the extent that the
provisions of the Agreement have not been amended by this First
Amendment, the parties hereto hereby confirm and ratify the Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment as of the
date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /S/
--------------------------------
Name: Thomas L. West, Jr.
Title: Senior Vice President
SCUDDER LIFE INVESTMENT FUND
By: /S/
-------------------------------
Name: David S. Lee
Title: Vice President
12
<PAGE>
SECOND AMENDMENT
to the
FUND PARTICIPATION AGREEMENT
This Second Amendment, dated August 13, 1993 by and between Aetna Life Insurance
and Annuity Company (the "Company") and Scudder Variable Life Investment Fund
(the "Fund"), is as follows:
WHEREAS, the Company and the Fund are parties to a Participation Agreement dated
April 27, 1992, as amended by the First Amendment to Fund Participation
Agreement dated February 19, 1993 (the "Agreement").
WHEREAS, the Company and the Fund now desire to modify the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual convenants and
promises expressed herein, the parties hereto agree as follows:
1. Shares of the Scudder Variable Life Investment Fund -
International Portfolio shall be made available to serve as an
underlying investment medium for any Separate account of Aetna
Life Insurance and Annuity Company which funds variable annuity
or variable life insurance contracts of the Company, upon written
notice duly given to the Fund in accordance with the terms
of Section 10 of the Agreement.
2. The opening paragraph of the Agreement is hereby amended as
follows:
PARTICIPATION AGREEMENT (the "Agreement") made by and between
SCUDDER VARIABLE LIFE INVESTMENT FUND (the "Fund"), a
Massachusetts business trust created under a Declaration of Trust
dated March 15, 1985, as amended, with a principal place of
business in Boston, Massachusetts and Aetna Life Insurance and
Annuity Company, a Connecticut corporation (the "Company"), with
a principal place of business in Hartford, Connecticut on behalf
of the Company's Variable Life Account B and Variable Annuity
Accounts B, C and D, and any other separate account of the
Company, as designated by the Company from time to time, upon
written notice to the Fund in accordance with Section 10 herein
(the "Account").
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of
the date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /S/ Thomas L. West, Jr.
---------------------------------
Name: Thomas L. West, Jr.
Title: Senior Vice President
SCUDDER VARIABLE LIFE INVESTMENT FUND
By: /S/ David B. Watts
----------------------------------
Name: David B. Watts
Title: President
14
<PAGE>
FUND PARTICIPATION AGREEMENT
Aetna Life Insurance and Annuity Company (the "Company") and TCI
Portfolios, Inc. ("TCIP") and its investment adviser, Investors Research
Corporation ("Investors Research") hereby agree to an arrangement whereby shares
of TCI Growth and TCI Balanced (the "Funds") shall be made available to serve as
underlying investment media for Group Variable Annuity Contracts ("Contracts")
to be offered to the public by the Company, subject to the following provision:
1. ESTABLISHMENT OF ACCOUNTS; AVAILABILITY OF FUNDS.
(a) The Company represents that it has established Variable Annuity
Accounts B, C and D (the "Accounts"), each of which is a separate
account under Connecticut Insurance Law and has registered each of the
Accounts (except Account D, for which no such registration is
required) as a unit investment trust under the Investment Company Act
of 1940 (the "1940 Act"). Each Contract provides for the allocation
of net amounts received by the Company to separate series of an
Account for investment in the shares of one of more specified
investment companies selected among those companies available through
the Account to act as underlying investment media. Selection of a
particular investment company is made by the participant or Contract
owner, as applicable under a particular Contract, who may change such
selection from time to time in accordance with the terms of the
applicable Contract.
(b) TCIP and Investors Research represent and warrant that the investments
of each of the Funds will at all times be adequately diversified
within the meaning of Section 817(h) of the Internal Revenue Service
Code of 1986, as amended (the "Code"), and the regulations thereunder,
and that at all times while this Agreement is in effect, all
beneficial interests in each of the Funds will be owned by one or more
insurance companies or by any other party permitted under Section
1.817-5(f)(3) of the Regulations promulgated under the Code.
2. MARKETING AND PROMOTION.
The Company agrees to make every reasonable effort to market its Contracts.
It will use its best efforts to give equal emphasis and promotion to shares of
the Funds as is given to other underlying investments of the Account. In
marketing and administering its Contracts, the Company will comply with all
applicable state and Federal laws.
3. PRICING INFORMATION; ORDERS; SETTLEMENT.
(a) TCIP will make shares available to be purchased by the Company on
behalf of each Account at the net asset value applicable to each
order. Fund shares shall be purchased and redeemed in such quantity
and at such time determined by the Company to be necessary to meet the
requirements of those Contracts for which the Funds serve as
underlying investment media.
<PAGE>
(b) TCIP will provide to the Company closing net asset value, dividend and
capital gain information at the close of trading each day that the New
York Stock Exchange (the "Exchange") is open (each such day, a
business day"). The Company will send via facsimile transmission to
TCIP or its specified agent orders to purchase and/or redeem Fund
shares by 10:00 a.m. Eastern Time the following business day. Payment
for net purchases will be wired by the Company to a custodial account
designated by TCIP to coincide with the order for shares of the Funds.
(c) TCIP hereby appoints the Company as its agent for the limited purpose
of accepting purchase and redemption orders for Fund shares from
Contract owners or participants. Orders from Contract owners or
participants received by the Company acting as agent for TCIP prior to
the close of the Exchange on any given business day will be executed
by TCIP at the net asset value determined as of the close of the
Exchange on such business day. Any orders received by the Company
acting as agent on such day but after the close of the Exchange will
be executed by TCIP at the net asset value determined as of the close
of the Exchange on the next business day following the day of receipt
of such order.
(d) Payments for net redemptions of shares of the Funds will be wired by
TCIP from the TCIP custodial account to an account designated by the
Company.
4. EXPENSES.
(a) Except as otherwise provided in this Agreement, all expenses incident
to the performance by TCIP under this Agreement shall be paid by
Investors Research or TCIP, including the cost of registration of
TCIP's shares with the Securities and Exchange Commission (the "SEC")
and in states where required.
(b) TCIP shall distribute to the Company its proxy material, periodic fund
reports to shareholders and other material that are required by law to
be sent to Contract owners. In addition, TCIP shall provide the
Company with a sufficient quantity of its prospectuses to be used in
connection with the offerings and transactions contemplated by this
Agreement. Subject to subsection (c) below, the cost of preparing and
printing such materials shall be paid by TCIP, and the cost of
distributing such materials shall be paid by the Company; PROVIDED,
HOWEVER, that at any time TCIP reasonably deems the usage of such
materials to be excessive, it may request that the Company pay the
cost of printing (including press time and paper) of any additional
copies of such materials requested by the Company.
(c) In lieu of TCIP providing printed copies of prospectuses and periodic
fund reports to shareholders, the Company shall have the right to
request that TCIP provide to the Company a copy of such materials in
an electronic format, which the Company will use to have such
materials printed together with similar materials of other Account
funding media that the Company will distribute to Contract owners or
participants. In that event, TCIP shall reimburse the Company for the
same proportion of the total printing expense for such materials as
the number pages in
2
<PAGE>
in each such printed document provided by TCIP bears to the total
number of pages in such printed document.
5. REPRESENTATIONS.
The Company and its agents shall not, without the written consent of TCIP,
make representations concerning TCIP or its shares except those contained in the
then current prospectuses and in current printed sales literature of TCIP.
6. ADMINISTRATION OF ACCOUNTS.
(a) Administrative services to Contract owners and participants shall be
the responsibility of the Company and shall not be the responsibility
of TCIP or Investors Research. TCIP and Investors Research recognize
the Company as the sole shareholder of TCIP shares issued under this
Agreement. TCIP and Investors Research further recognize that they
will derive a substantial savings in administrative expense, such as
significant reductions in postage expense and shareholder
communications and recordkeeping, by virtue of having a sole
shareholder for each of the Accounts rather than multiple
shareholders. In consideration of the administrative savings
resulting from such arrangement, and to compensate the Company for
administrative service costs, Investors Research agrees to pay to the
Company an amount equal to 15 basis points (0.15%) per annum of the
average aggregate amount invested by the Company under this Agreement,
commencing with the month in which the average aggregate market value
of investments by the Company (on behalf of the Contract owners and
participants) in the Funds exceeds $10 million. No payment obligation
shall arise until the Company's average aggregate investment in the
Funds reaches $10 million, and such payment obligation, once
commenced, shall be suspended with respect to any month during which
the Company's average aggregate investment in the Funds drop below $10
million.
(b) The parties understand that Investors Research customarily pays, out
of its management fee, another affiliated corporation for the type of
administrative services to be provided by the Company to the Contract
owners and participants. The parties agree that Investors Research's
payments to the Company, like Investors Research's payments to its
affiliated corporation, are for administrative services only and do
not constitute payment in any manner for investment advisory services
or for costs of distribution.
(c) For the purposes of computing the administrative fee reimbursement
contemplated by this Section 6, the average aggregate amount invested
by the Company over a one month period shall be computed by totaling
the Company's aggregate investment (share net asset value multiplied
by total number of shares held by the Company) on each business day
during the month and dividing the total number of business days during
such month.
3
<PAGE>
(d) Investors Research will calculate the reimbursement of administrative
expense at the end of each calendar quarter and will make such
reimbursement to the Company within 30 days thereafter. The
reimbursement check will be accompanied by a statement showing the
calculation of the monthly amounts payable by Investors Research and
such other supporting data as may be reasonably requested by the
Company.
7. TERMINATION.
This agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company or TCIP upon six months' advance
written notice to the other;
(b) at the option of the Company if TCIP shares are not available for any
reason to meet the requirement of Contracts as determined by the
Company. Reasonable advance notice of election to terminate shall be
furnished by Company;
(c) at the option of either the Company or TCIP, upon institution of
formal proceedings against the broker-dealer or broker-dealers
marketing the Contracts, the Account, the Company, or TCIP by the
National Association of Securities Dealers, Inc. (the "NASD"), the SEC
or any other regulatory body;
(d) upon termination of the Management Agreement between TCIP and
Investors Research. Notice of such termination shall be promptly
furnished to the Company. This subsection (d) shall not be deemed to
apply if contemporaneously with such termination a new contract of
substantially similar terms is entered into between TCIP and Investors
Research;
(e) upon requisite vote of Contract owners or participants having an
interest in TCIP to substitute for TCIP's shares the shares of another
investment company in accordance with the terms of Contracts for which
TCIP's shares had been selected to serve as the underlying investment
medium. The Company will give 60 days' written notice to TCIP of any
proposed vote to replace the Funds' shares;
(f) upon assignment of this Agreement unless made with the written consent
of all other parties hereto;
(g) if TCIP's shares are not registered, issued or sold in conformance
with Federal law or such law precludes the use of Fund shares as an
underlying investment medium of Contracts issued or to be issued by
the Company. Prompt notice shall be given by either party should such
situation occur.
8. CONTINUATION OF AGREEMENT.
Termination as the result of any cause listed in Section 7 shall not affect
TCIP's obligation to furnish its shares to Contracts then in force for which its
shares serve or may
4
<PAGE>
serve as the underlying medium unless such further sale of Fund shares is
proscribed by law or the SEC or other regulatory body.
9. ADVERTISING MATERIALS; FIELD DOCUMENTS.
(a) Advertising and literature with respect to TCIP prepared by the
Company or its agents for use in marketing its Contracts will be
submitted to TCIP for review before such material is submitted to the
SEC or NASD for review.
(b) TCIP will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements and all
amendments or supplements to any of the above that relate to the Funds
promptly after the filing of such document with the SEC or other
regulatory authorities. the Company will provide to TCIP at least one
complete copy of all registration statement, prospectuses, statements
of additional information, annual and semi-annual reports, proxy
statements, and all amendments or supplements to any of the above that
relate to the Account promptly after the filing of such document with
the SEC or other regulatory authority.
10. PROXY VOTING
(a) The Company shall provide pass-through voting privileges to all
Contract owners and participants so long as the SEC continues to
interpret the 1940 Act as requiring such privileges. It shall be the
responsibility of the Company to assure that it and the separate
accounts of the other Participating Companies (as defined in Section
12(a) below) participating in any Fund calculate voting privileges in
a consistent manner.
(b) The Company will distribute to Contract owners and participants, as
appropriate, all proxy material furnished by TCIP and will vote shares
in accordance with instructions received from such Contract owners and
participants. The Company shall vote TCIP shares for which no
instructions have been received in the same proportion as shares for
which such instructions have been received. The Company and its
agents shall not oppose or interfere with the solicitation of proxies
for TCIP shares held for such Contract owners and participants.
11. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless TCIP and each of its
directors, officers, employees, agents and each person, if any, who
controls TCIP or its investment adviser within the meaning of the
Securities Act of 1933 (the "1933 Act") against any losses, claims,
damages or liabilities to which TCIP or any such director, officer,
employee, agent, or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect hereof) arise out of or based upon
any untrue statement or alleged untrue statement of any material fact
contained in the
5
<PAGE>
Registration Statement, prospectus or sales literature of the Company
or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arise out
of or as a result of conduct, statements or representations (other
than statements or representations contained in the prospectuses or
sales literature of TCIP) of the Company or its agents, with respect
to the sale and distribution of Contracts for which TCI Growth or TCI
Balanced shares are the underlying investment. The Company will
reimburse any legal or other expenses reasonably incurred by TCIP or
any such director, officer, employee, agent, investment adviser, or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that
the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon
an untrue statement or omission or alleged omission made in such
Registration Statement or prospectus in conformity with written
materials furnished to the Company by TCIP specifically for use
therein. This indemnity agreement will be in addition to any
liability which Company may otherwise have.
(b) Investors Research agrees to indemnify and hold harmless the Company
and each of its directors, officers, employees, agents and each
person, if any, who controls the Company within the meaning of the
1933 Act against any losses, claims damages or liabilities to which
the Company or such director, officer, employee, agent or controlling
person may become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, prospectuses or sales literature of the Funds
or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or
material fact required to be stated therein or necessary to make the
statements therein not misleading. Investors Research will reimburse
any legal or other expenses reasonably incurred by the Company or any
such director, officer, employee, agent, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that Investors
Research will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon
an untrue statement or omission or alleged omission made in such
Registration Statement or prospectuses in conformity with written
materials furnished to TCIP by the Company specifically for use
therein. This indemnity agreement will be in addition to any
liability which Investors Research may otherwise have.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party
otherwise than under this Section 11. In case any such action is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement
6
<PAGE>
thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish to, assume the defense
thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of
its election to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under this Section 11 for
any legal or other expenses subsequentlyincurred by such indemnified
party in connection with the defense thereof other than reasonable
costs of investigation.
12. POTENTIAL CONFLICTS.
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by TCIP on December 21, 1987, with the SEC
and the order issued by the SEC in response thereto (the "Shared
Funding Exemptive Order"). The Company has reviewed the conditions to
the requested relief set forth in such application for exemptive
relief. As set forth in such application, the Board of Directors of
TCIP (the "Board") will monitor TCIP for the existence of any material
irreconcilable conflict between the interests of the contractholders
of all separate accounts ("Participating Companies") investing in
TCIP. An irreconcilable material conflict may arise for a variety of
reasons, including: (i) an action by any state insurance regulatory
authority; (ii) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar
actions by insurance, tax or securities regulatory authorities; (iii)
an administrative or judicial decision in any relevant proceeding;
(iv) the manner in which the investments of any portfolio are being
managed; (v) a difference in voting instructions given by variable
annuity contractholders and variable life insurance contractholders;
or (vi) a decision by an insurer to disregard the voting instructions
of contractholders. The Board shall promptly inform the Company if it
determines that an irreconcilable material conflict exists and the
implication thereof.
(b) The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in
carrying out its responsibilities under the Shared Funding Exemptive
Order by providing the Board with all information reasonably necessary
for the Board to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Board
whenever contractholder voting instructions are disregarded.
(c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists
with regard to contractholder investments in a Fund, the Board shall
give prompt notice to all Participating Companies. If the Board
determines that the Company is responsible for causing or creating
said conflict, the Company shall at its sole cost and expense, and to
the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take such action as is necessary to
remedy or eliminate the irreconcilable material conflict. Such
necessary action may include but shall not be limited to:
7
<PAGE>
(i) withdrawing the assets allocable to the Account from the Fund and
reinvesting such assets in a different investment medium or
submitting the question of whether such segregation should be
implemented to a vote of all affected contractholders and as
appropriate, segregating the assets of any appropriate group
(i.e, annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Companies)
that votes in favor of such segregation, or offering to the
affected contractholders the option of making such a change;
and/or
(ii) establishing a new registered management investment company or
managed separate account.
(d) If a material irreconcilable conflict arises as a result of a decision
by the Company to disregard its contractholder voting instructions and
said decision represents a minority position or would preclude a
majority vote by all of its contractholders having an interest in
TCIP, the Company at its sole cost, may be required, at the Board's
election, to withdraw an Account's investment in TCIP, and terminate
this Agreement; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
(e) For the purpose of this Section 13, a majority of the disinterested
Board members shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no
event will TCIP be required to establish a new funding medium for any
Contract. The Company shall not be required by this Section 13 to
establish a new funding medium for any Contract if an offer to do so
has been declined by vote of a majority of the Contract owners or
participants materially adversely affected by the irreconcilable
material conflict.
13. MISCELLANEOUS.
(a) AMENDMENT AND WAIVER. Neither this Agreement , nor any provision
hereof, may be amended, waived, discharge or terminated orally, but
only an instrument in writing signed by all parties hereto.
(b) NOTICES. All notices and other communications hereunder shall be
given or made in writing and shall be delivered personally, or sent by
telex, telecopier or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are
directed at the following addresses, or at such other addresses as may
be designated by notice from such party to all other parties.
To the Company:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Attention:# Timothy J. Thornton
8
<PAGE>
To TCIP or Investors Research:
TCIP Portfolios, Inc.
4500 Main Street
Kansas City, Missouri 64111
Attention: Patrick A. Looby
Any notice, demand or other communication given in a manner prescribed in this
subsection (b) shall be deemed to have been delivered on receipt.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective.
permitted successors and assigns.
(d) COUNTERPARTS. This agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by signing
any such counterpart.
(e) SEVERABILITY. In case any one or more of the provisions contained in
this agreement should be invalid, illegal or unenforceable in any
respect , the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby.
(f) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto and supersedes all prior
agreement and understandings relating to the subject matter hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers as of this 29th day of July, 1992.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By /S/ Thomas L. West
-----------------------------------
Name: Thomas L. West
Title: Senior Vice President
INVESTORS RESEARCH CORPORATION
By /S/ William M. Lyons
-----------------------------------
Name: William M. Lyons
Title: Senior Vice President
TCI PORTFOLIOS, INC.
By: /S/ Patrick A. Looby
-----------------------------------
Name: Patrick A. Looby
Title: Vice President
9
<PAGE>
FIRST AMENDMENT TO
FUND PARTICIPATION AGREEMENT
This First Amendment, executed as of the 22nd day of December, 1992, is by and
among Aetna Life Insurance and Annuity Company (the "Company"), TCI Portfolio,
Inc. ("TCIP") and its investment adviser, Investors Research Corporation
("Investors Research").
W I T N E S S E T H
WHEREAS, the Company, TCIP and Investors Research are parties to a Fund
Participation Agreement (the "Agreement") dated July 29, 1992; and
WHEREAS, the Company, TCIP and Investors Research now desire to modify the
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
promises expressed herein, the parties agree as follows:
1. The parties agree that shares of TCI Growth and TCI Balanced, two series of
shares issued by TCIP, shall be made available to serve as underlying
investment media within the Variable Life Account B for Variable Life
Contracts ("Variable Life Contracts") offered by the Company.
2. Paragraph 1 of the Agreement is hereby amended to include the following
subparagraph (c):
(c) The Company represents that it has established Variable Life Account B
as a separate account under Connecticut Insurance law, and has
registered Variable Life Account B as a unit investment trust under
the Investment Company Act of 1940 (the "1940 Act") to serve as an
investment vehicle for the Variable Life Contracts. Each Variable
Life Contract provides for the allocation of net amounts received by
the Company to separate series of Variable Life Account B for
investment in the shares of one or more specified investment companies
selected from among those companies available through Variable Life
Account B to act as underlying investment media. Selection of a
particular investment company is made by the Variable Life Contract
owner, who may change such selection from time to time in accordance
with the terms of the applicable Variable Life Contract.
3. All references in the Agreement to the defined term "Contract" shall be
deemed to include Variable Life Contracts.
4. All references in the Agreement to the defined term "Accounts" shall be
deemed to include Variable Life Account B.
5. In the event that there is any conflict between the terms of this First
Amendment and the Agreement, it is the intention of the parties hereto that
the terms of this First Amendment
10
<PAGE>
shall control, and the Agreement shall be interpreted on that basis. To
the extent that the provisions of the Agreement have not been amended by
this First Amendment, the parties hereto confirm and ratify the
Agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of the
date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /S/ Thomas L. West, JR.
-----------------------------------
Name: Thomas L. West, Jr.
Title: Senior Vice President
INVESTORS RESEARCH CORPORATION
By: /S/ William M. Lyons
-----------------------------------
Name: William M. Lyons
Title: Senior Vice President
TCI PORTFOLIOS, INC.
By: /S/ Patrick A. Looby
------------------------------------
Name: Patrick A. Looby
Title: Vice President
11
<PAGE>
SECOND AMENDMENT TO
FUND PARTICIPATION AGREEMENT
THIS SECOND AMENDMENT TO FUND PARTICIPATION AGREEMENT (the "Second Amendment")
is made and entered into as of the 1st day of June, 1994, by and among AETNA
LIFE INSURANCE AND ANNUITY COMPANY (the "Company"), TCI PORTFOLIOS, INC.
("TCIP") and its investment adviser, INVESTORS RESEARCH CORPORATION ("Investors
Research"). All capitalized items terms not otherwise defined herein shall have
the meaning ascribed to them in the Original Agreement (defined below).
W I T N E S S E T H
WHEREAS, the Company, TCIP and Investors Research are parties to a Fund
Participation Agreement, dated July 29, 1992 (the "Original Agreement"), as
amended by the First Amendment to Fund Participation Agreement, dated as of
December 22, 1992 (the "First Amendment"); and
WHEREAS, the Company, TCIP and Investors Research now desire to modify the
Original Agreement, as amended by the First Amendment, (I) to add TCI
International Equity as a funding option for the Contracts, (ii) to expand the
definition of "Contracts" to include individual annuity contracts to be offered
by the Company, and (iii) to increase the administrative services fee
reimbursement from 15 basis points to 20 basis points per annum of the average
aggregate amount invested by the Company under the Agreement (as defined below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
promises expressed herein, the parties agree as follows:
1. The first sentence of the Original Agreement is hereby amended by deleting
the text thereof in its entirety and inserting in lieu therefor the
following:
"AETNA LIFE INSURANCE AND ANNUITY COMPANY (the "Company") and TCI
PORTFOLIOS, INC. ("TCIP"), and its investment adviser, INVESTORS RESEARCH
CORPORATION ("Investors Research") hereby agree to an arrangement whereby
shares of TCI Growth, TCI Balanced and TCI International Equity (the
"Funds") shall be made available to serve as underlying investment media
for individual and group variable annuity contracts (the "Contracts") to be
offered to the public by the Company, subject to the provisions set forth
in this Agreement.
2. Paragraph 1 of the Original Agreement is hereby amended by deleting the
first sentence thereof in its entirety and inserting in lieu therefor the
following:
"The Company represents and warrants that is has established separate
accounts pursuant to Connecticut Insurance Law (the "Accounts") to serve as
the underlying investment vehicles for the Contracts. The Company further
represents and warrants that each of the Accounts is registered as a unit
investment trust under the Investment Company Act
12
<PAGE>
of 1940, as amended (the "1940 Act") or is exempt from the registration
requirements of the 1940 Act."
3. Paragraph 6 of the Original Agreement is hereby amended by deleting the
fourth sentence of subparagraph (a) thereof and inserting in lieu therefor
the following:
"In consideration of the administrative savings resulting from such
arrangement, and to compensate the Company for administrative service
costs, Investors Research agrees to pay to the Company an amount equal to
20 basis points (.20%) per annum of the average aggregate amount invested
by the Company under this Agreement."
The above increase in the administrative services fee reimbursement shall
be effective as of March 1, 1994.
4. After the date hereof, all reference to the term "Agreement" shall be
deemed to mean the Original Agreement, as amended by the First Amendment
and the Second Amendment.
5. In the event that there is any conflict between the terms of this Second
Amendment and the Original Agreement, as amended by the First Amendment, it
is the intention of the parties hereto that the terms of this Second
Amendment shall control, and the Original Agreement, as amended by the
First Amendment, shall be interpreted on that basis. To the extent that
the provisions of the Original Agreement, as amended by the First
Amendment, have not been amended by this Second Amendment, the parties
hereto hereby confirm and ratify the Original Agreement and the First
Amendment.
IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the
date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By:
-------------------------------
Scott Striegel
Senior Vice President
INVESTORS RESEARCH CORPORATION
By:
--------------------------------
William M. Lyons
Executive Vice President
TCI PORTFOLIOS, INC.
13
<PAGE>
By:
---------------------------------
William M. Lyons
Executive Vice President
14
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors of Aetna Life Insurance and Annuity Company
and Contract Owners of Aetna Variable Annuity Account C:
We consent to the use of our reports dated February 6, 1996 and February 16,
1996 included herein and to the references to our Firm under the captions
"Condensed Financial Information" in the Prospectus and "Independent Auditors"
in the Statement of Additional Information.
Our report dated February 6, 1996 refers to a change in 1993 in the Company's
method of accounting for certain investments in debt and equity securities.
KPMG Peat Marwick LLP
Hartford, Connecticut
April 12, 1996
<PAGE>
Exhibit 10.2
Susan E. Bryant
Counsel
Law & Regulatory Affairs, RE4C
151 Farmington Avenue
Hartford, CT 06156
(860) 273-7834
Fax: (860) 273-8340
April 12, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Filing Desk
Re: Variable Annuity Account C of Aetna Life Insurance and Annuity
Company Post-Effective Amendment No. 5 to the Registration
Statement on Form N-4
File Nos. 33-75986 and 811-2513
-------------------------------
Gentlemen:
As Counsel of Aetna Life Insurance and Annuity Company (the "Company"), I
hereby consent to the use of my opinion dated February 28, 1996 (incorporated
herein by reference to the 24f-2 Notice for the fiscal year ended December
31, 1995 filed on behalf of Variable Annuity Account C of Aetna Life
Insurance and Annuity Company on February 29, 1996) as an exhibit to this
Post-Effective Amendment No. 5 to the Registration Statement on Form N-4
(File No. 33-75986) and to my being named under the caption "Legal Matters"
therein.
Very truly yours,
/s/ Susan E. Bryant
Susan E. Bryant
<PAGE>
[AETNA LOGO] [AETNA LETTERHEAD]
AETNA LIFE INSURANCE AND ANNUITY COMPANY
I, Susan E. Schechter, Corporate Secretary of Aetna Life Insurance and Annuity
Company (the "Company"), hereby certify that the following resolution was duly
adopted by the Board of Directors of the Company by Unanimous Consent on June
22, 1995 and that such resolution remains in full force and effect as of this
date.
RESOLVED: That the following officers:
President
Senior Vice President
Vice President
General Counsel
Corporate Secretary
Treasurer
Assistant Corporate Secretary
(l) are hereby severally authorized to sign in the
Company's name:
(a) insurance contracts of every type and description
which the Company is authorized to write;
(b) agreements relating to the purchase, sale, or
exchange of securities including any consents and
modifications given or made under such agreements;
(c) conveyances and leases of real estate or any
interest therein including any modifications
thereof;
(d) assignments and releases of mortgages and other
liens, claims or demands;
(e) any other written instrument which they are
authorized to approve in the normal course of
Company business; and
(f) any other written instrument when specifically
authorized by the Board of Directors or the
President;
and are further severally authorized (i) to delegate
all or any part of the foregoing authority to one or
more officers, employees or agents of this Company,
provided that each such delegation is in writing and a
copy thereof is filed in the Office of the Corporate
Secretary, or (ii) to designate any attorney at law
representing this Company on a matter under their
direction, to so sign this Company's name;
(2) are hereby severally authorized to possess the
Company's duplicate seals and to affix the same to
items (a) through (f) above;
<PAGE>
Page 2
and are further severally authorized to designate any
Company officer under their direction to possess and to
so affix the Company's duplicate seals; and
that the Senior Vice President, Investments is hereby
authorized to designate any officer, employee or agent
of this Company under his direction to sign the
Company's name and to affix the Company's seal to any
and all documents required in connection with any
investment transaction in which the Company has an
interest.
FURTHER RESOLVED, that all actions heretofore taken by an officer,
Director or employee of this Company in connection with any
transaction authorized by this resolution and consistent with the
intent and purposes of the foregoing resolution are hereby ratified,
confirmed and approved in all respects.
I further certify that Daniel P. Kearney is President, Zoe Baird, Christopher
J. Burns, Laura R. Estes, and John Y. Kim are Senior Vice Presidents, Timothy
A. Holt is Senior Vice President and Chief Financial Officer and Eugene M.
Trovato is Vice President and Treasurer, Corporate Controller of the Company.
Dated at Hartford, Connecticut, on March 19, 1996.
/s/ Susan E. Schechter
----------------------------------------
Susan E. Schechter
Corporate Secretary
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<PERIOD-START> JAN-01-1995
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