VARIABLE ANNUITY ACCT C OF AETNA LIFE INSURANCE & ANNUITY CO, 485APOS, 1996-08-06

VARIABLE ANNUITY ACCT C OF AETNA LIFE INSURANCE & ANNUITY CO
485APOS, 1996-08-06

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As filed with the Securities and Exchange Registration No. 33-91846*
Commission on August 6, 1996 Registration No. 811-2513

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-4

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Post-Effective Amendment No. 6 To
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

and Amendment To

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

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Variable Annuity Account 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 September 16, 1996 pursuant to paragraph (a)(1)
- ---- of Rule 485. A request for Acceleration is included herewith.

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 a
prospectus relating to the securities covered by the following earlier
Registration Statement: 33-75976.

<PAGE>

VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET

FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
- --------- ------------------- ---------
<S> <C> <C>
1 Cover Page................................... Cover Page

2 Definitions.................................. Definitions

3 Synopsis..................................... 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

</TABLE>

<PAGE>

FORM N-4 PART B (STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION) LOCATION
- --------- ------------------------------- ---------
<S> <C> <C>

14 Table of Contents of the Statement of
Additional Information........................ Contents of the Statement of Additional
Information

15 Cover Page.................................... Cover page

16 Table of Contents............................. Table of Contents

17 General Information and History............... General Information and History

18 Services...................................... General Information and History;
Independent Auditors

19 Purchase of Securities Being Offered.......... Offering and Purchase of Contracts

20 Underwriters.................................. Offering and Purchase of Contracts

21 Calculation of Performance Data............... Performance Data; Average Annual
Total Return Quotations

22 Annuity Payments.............................. 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>

VARIABLE ANNUITY ACCOUNT C
Aetna Life Insurance and Annuity Company

Supplement dated __________________, 1996 to the
Prospectus dated ___________________, 1996

Group Deferred Variable Annuity Contracts for use with
Optional Retirement Programs (Section 403(b) and 401(a))

This supplement describes Series C of Aetna GET Fund (GET C), an investment
option which may be available under the contract described by the prospectus
to which this supplement is attached (Contract) and a guarantee offered by
the Aetna Life Insurance and Annuity Company (Aetna) in connection with
investments in GET C.

AETNA GET FUND - SERIES C

GET C seeks to achieve maximum total return without compromising a minimum
target rate of return by participating in favorable equity market performance
during a Guaranteed Period. GET C shares will be offered for a limited time
period (Offering Period). Aetna reserves the right to reject amounts of less
than $5,000 transferred to GET C. Aetna is the investment adviser to GET C.
Aeltus Investment Management, Inc. is the sub-adviser to GET C.

THE GET FUND GUARANTEE

GET C will mature in five years (Maturity Date), which will end the
Guaranteed Period for GET C. Aetna guarantees that the value of a GET C
accumulation unit on the Maturity Date will not be less than the value of a
GET C accumulation unit at the beginning of the Guaranteed Period. If
necessary, Aetna will transfer funds from its General Account to GET C to
offset any shortfall. THIS GUARANTEE DOES NOT APPLY TO WITHDRAWALS OR
TRANSFERS MADE BEFORE THE MATURITY DATE. Such withdrawals or transfers are
made at the actual accumulation unit value on the date of the transaction.
The Guarantee does not cover any annual account maintenance fee.

GET C is only available as an investment option during the accumulation
period. GET C should not be selected if annuity payments or other withdrawals
or transfers from GET C are expected to begin prior to the Maturity Date.
Participants must transfer any portion of the value of their contract
(Contract Value) held in GET C to another investment option before an annuity
option is elected.

Prior to the Maturity Date, Aetna will send a notice to each contract
owner/participant with amounts in GET C advising them of the Maturity Date
and that another investment option must be elected. If no such election is
made, on the Maturity Date Aetna will transfer the portion of the Contract
Value based on GET C to another available series of GET Fund. If no GET Fund
series is available, 50% of the Contract Value from GET C will be transferred
to Aetna Variable Fund, a growth and income fund. The remaining 50% of the
Contract Value from GET C will be transferred to Aetna Income Shares, a bond
fund. The transfers would be made during the next valuation period.

Form No. X91846.2 September 1996

<PAGE>

The following information supplements the Fee Table contained in the
Prospectus.

AETNA GET FUND SERIES C ANNUAL EXPENSES
(As a percentage of average net assets)

TOTAL FUND
INVESTMENT OTHER ANNUAL
ADVISORY FEES EXPENSES * EXPENSES
------------- ---------- ----------
Aetna GET Fund Series C 0.60% 0.15% 0.75%

* 0.25% during the Offering Period. Thereafter, a management fee at an
annual rate of 0.60% will apply during the Guaranteed Period.

** Administrative Services includes all other expenses of GET C.

See the Prospectus for GET C for a more complete description of the fund,
including charges and expenses.

SEPARATE ACCOUNT ANNUAL EXPENSES
(As an annual percentage of average net asset value. The daily equivalent is
deducted from the GET C Subaccount of the Separate Account.)

MORTALITY AND EXPENSE RISK CHARGE........................................ 1.25%

GET GUARANTEE CHARGE (deducted daily during the Guaranteed Period)....... 0.25%

ASSET-BASED SALES CHARGE. We will monitor the deductions applicable...... 0.15%
to each Account for the total sales charges to ensure they will never
exceed 8.5% of the total Purchase Payments actually made to the
Account. The sales charges apply during the Accumulation Period
only.

ADMINISTRATIVE EXPENSE CHARGE. We currently do not impose an.............. 0.00%
administrative expenses charge. However, we reserve the right -----
to deduct a daily charge from the Subaccounts equivalent on an
annual basis to not more than 0.25%.

Total Separate Account Annual Expenses.................................... 1.65%
-----
See the Contract Prospectus for charges during the annuity period.

Form No. X91846.2 September 1996

<PAGE>

HYPOTHETICAL ILLUSTRATION (Example) - Aetna GET Fund Series C

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.

Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets, you would have paid the following expenses on a
$1,000 investment at the end of the applicable time period.

1 year 3 years 5 years 10 years
------ ------- ------- --------
Aetna GET Fund Series C $24 $75 $128 $274

Form No. X91846.2 September 1996

<PAGE>

SUBJECT TO COMPLETION OR AMENDMENT

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

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 designed to fund plans that provide retirement
income for employees of institutions of higher education. The Contracts are
available through participation in retirement programs which receive favorable
tax deferred treatment under Federal income tax law. (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 Growth Portfolio
- - Aetna Income Shares - Fidelity VIP Overseas Portfolio
- - Aetna Variable Encore Fund - Franklin Government Securities Trust
- - Aetna Investment Advisers Fund, Inc. - Janus Aspen Aggressive Growth
- - Aetna Ascent Variable Portfolio Portfolio
- - Aetna Crossroads Variable Portfolio - Janus Aspen Balanced Portfolio
- - Aetna Legacy Variable Portfolio - Janus Aspen Flexible Income
- - Aetna Variable Index Plus Portfolio Portfolio
- - Alger American Growth Portfolio - Janus Aspen Growth Portfolio
- - Alger American Small Cap Portfolio - Janus Aspen Short-Term Bond
- - Calvert Responsibly Invested Balanced Portfolio
Portfolio - Janus Aspen Worldwide Growth
- - Fidelity VIP II Contrafund Portfolio Portfolio
- - Fidelity VIP Equity-Income Portfolio - Lexington Natural Resources Trust
- Neuberger & Berman Growth Portfolio
- Scudder International 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 Plus Account and the Fixed Account
(available for accumulation only in limited circumstances). 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 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. 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 16 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 ,
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
Rights Under the Contract.................................... 5
Right to Cancel.............................................. 5
CHARGES AND DEDUCTIONS........................................... 5
Daily Deductions from the Separate Account................... 5
Mortality and Expense Risk Charge......................... 5
Asset Based Sales Charge.................................. 5
Administrative Expense Charge............................. 6
Fund Expenses................................................ 6
Premium and Other Taxes...................................... 6
CONTRACT VALUATION............................................... 6
Account Value................................................ 6
Accumulation Units........................................... 6
Net Investment Factor........................................ 6
TRANSFERS........................................................ 7
Dollar Cost Averaging Program................................ 7
WITHDRAWALS...................................................... 7
Reinvestment Privilege....................................... 8
CONTRACT LOANS................................................... 8
ADDITIONAL WITHDRAWAL OPTIONS.................................... 8
DEATH BENEFIT DURING ACCUMULATION PERIOD......................... 9
ANNUITY PERIOD................................................... 10
Annuity Period Elections..................................... 10
Annuity Options.............................................. 10
Duration of Annuity Payments................................. 10
Charges Deducted During the Annuity Period................... 11
Death Benefit Payable During the Annuity Period.............. 11
TAX STATUS....................................................... 11
Introduction................................................. 11
Taxation of the Company...................................... 12
Contracts Used with Certain Retirement Plans................. 12
</TABLE>
<PAGE>

<TABLE>
<S> <C>
MISCELLANEOUS.................................................... 14
Distribution................................................. 14
Delay or Suspension of Payments.............................. 14
Performance Reporting........................................ 15
Voting Rights................................................ 15
Changes in Beneficiary Designations.......................... 15
Modification of the Contract................................. 15
Legal Matters and Proceedings................................ 16
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.............. 16
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT...................... 17
APPENDIX II--FIXED PLUS ACCOUNT.................................. 18
APPENDIX III--FIXED PLUS ACCOUNT (Available Only In Limited
Circumstances)................................................. 20
APPENDIX IV--FIXED PLUS ACCOUNT (Available Only In Limited
Circumstances)................................................. 22
APPENDIX V--FIXED ACCOUNT (Available Only In Limited
Circumstances)................................................. 24
</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
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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.

BENEFICIARY(IES): The person(s) entitled to receive any death benefit upon the
death of the Participant.

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 HOLDER: The 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 and the Fixed Plus Account, each of which is described in an Appendix to
this Prospectus. The Fixed Account is an additional Credited Interest Option
described in an Appendix to this Prospectus; however, the Fixed Account is
available during accumulation only in limited circumstances. 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 or salary deduction contributions (as provided for by
the Plan) 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.
SECTION 403(B) CONTRACT: A Contract that accepts Purchase Payments made pursuant
to Code Section 403(b) and transferred funds attributable to Code Section
403(b).

SECTION 401(A) CONTRACT: A Contract that accepts Purchase Payments made pursuant
to Code Section 401(a) and transferred funds attributable to Section 401(a)
contributions. Section 401(a) Contracts issued to some Plans may also accept
Purchase Payments made pursuant to Code Section 414(h) and transferred funds
attributable to Section 414(h).

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.

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DEFINITIONS - 1
<PAGE>
HOME OFFICE: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.

LOAN ACCOUNT: An account established for record keeping purposes and credited
with the amount of any loan.

MASTER CONTRACTS: Contracts used in conjunction with a group of affiliated
government institutions of higher education.

PARTICIPANT (YOU): A person participating in a Plan maintained by an eligible
organization.

PLAN(S): Tax-deferred retirement plans adopted by higher education systems for
their employees under Section 401(a) or Section 403(b) of the Code.

PURCHASE PAYMENT(S): The gross payment(s) submitted to the Company under a
Contract.

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 institutions of higher
education to fund (1) tax-deferred annuity programs under Section 403(b) of the
Code, and/or (2) qualified defined contribution plans under Section 401(a) of
the Code. Section 401 Contracts issued to some Plans may also accept payments
and transferred funds made pursuant to Section 414(h) of the Code.

CONTRACT PURCHASE

The Contract may be purchased by institutions of higher education on behalf
of a group made up of their employees. One or more Contracts are issued to the
Contract Holder once we receive a completed master application form(s). Eligible
employees may participate in the Contract by completing the enrollment form (and
any other required forms) and submitting them to the Company. Depending upon the
terms of the Plan, Purchase Payments can be applied to the Contract either
through a lump-sum transfer, through periodic salary reduction or salary
deduction, or through employer contributions. For each Contract, one or more
Employee Accounts will be established for contributions made by an employee, and
one or more Employer Accounts may be established for contributions made by the
employer on the employee's behalf. (See "Purchase.")

FREE LOOK PERIOD

You or the Contract Holder may cancel participation in the Contract within
10 days after you receive the Contract or other document evidencing your
interest in 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 that will be 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 Plus Account
and the Fixed Account (available during accumulation only in limited
circumstances). (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, an asset based sales charge and an administrative expense charge), as
well as premium and other taxes. Not all charges apply to all Contracts. The
Funds also incur certain fees and expenses which are deducted directly from the
Funds. (See the Fee Table and "Charges and Deductions.")

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SUMMARY - 1
<PAGE>
TRANSFERS

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 the Appendices for a full description of the restrictions
applicable to transfers made from the Credited Interest Options.) (See
"Transfers.")

WITHDRAWALS

All or a part of the Account Value may be withdrawn prior to the Annuity
Date, subject to Plan provisions, by properly completing a disbursement form and
sending it to the Company. Limitations apply to withdrawals from the Credited
Interest Options. A distribution can be made from certain Employer Accounts and
certain Employee Accounts (as provided by the Plan) only if the Contract Holder
certifies in writing that you are eligible, both as to timing and form of
distribution. The withdrawal will generally be subject to income tax and may be
subject to a federal tax penalty. The Code restricts full and partial
withdrawals in some circumstances. (See "Withdrawals.")

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

If allowed by the Plan, Participants may request a loan from their Account
Value during the Accumulation Period. (See "Contract Loans.")

DEATH BENEFIT

A death benefit is payable if the Participant dies before the Annuity Date.
Death benefit proceeds will be paid to the Beneficiary. Until the election of a
method of payment, the Account Value will remain invested under the Contract.
The 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 the Accumulation Period.")

After Annuity Payments have commenced, a death benefit may be payable to the
Beneficiary depending upon the terms of the Contract and the Annuity Option
selected. (See "Death Benefit Payable During the Annuity Period.")

THE ANNUITY PERIOD
You may elect to begin receiving Annuity Payments on the Annuity Date. For
certain Employer and Employee Accounts, the Contract Holder must provide written
certification that the distribution is in accordance with the terms of the Plan.
(See "Rights Under the Contract.") Annuity Payments can be made on either a
fixed, variable or combination fixed and variable basis. If you choose a
variable payout, 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.")

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SUMMARY - 2
<PAGE>
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

- Call Customer Service: 1-800-525-4225 (for automated transfers or changes
in the allocation of Account Values, call:
1-800-262-3862)
</TABLE>

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SUMMARY - 3
<PAGE>
FEE TABLE
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This Fee Table describes the various charges and expenses associated with the
Contract. The charges and expenses shown below do not include premium taxes that
may be applicable. For more information regarding the expenses paid out of the
assets of a particular Fund, see the Fund's prospectus.

TABLE A--FOR MASTER CONTRACTS ISSUED
ON OR AFTER OCTOBER 1, 1996

CHARGES AGAINST THE SEPARATE ACCOUNT. 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>
DURING THE ACCUMULATION PERIOD:
MORTALITY AND EXPENSE RISK CHARGE................................... 1.00%
ADMINISTRATIVE EXPENSE CHARGE. We currently do not impose an
Administrative Expense............................................. 0.00%
Charge. 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.................................... 1.00%
---------
---------
DURING THE ANNUITY PERIOD:
MORTALITY AND EXPENSE RISK CHARGE................................... 1.25%
ADMINISTRATIVE EXPENSE CHARGE. We currently do not impose an
Administrative Expense............................................. 0.00%
Charge. 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>

ANNUAL EXPENSES OF THE FUNDS

The following table illustrates the advisory fees and other expenses applicable
to the Funds. A Fund's "Other Expenses" include operating costs of the Fund.
These expenses are reflected in the Fund's net asset value and are not deducted
from the Account Value under the Contract. (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.)

<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) 0.50% 0.06% 0.56%
Aetna Income Shares(2) 0.40% 0.08% 0.48%
Aetna Variable Encore Fund(2) 0.25% 0.10% 0.35%
Aetna Investment Advisers Fund, Inc.(2) 0.50% 0.08% 0.58%
Aetna Ascent Variable Portfolio(2) 0.60% 0.15% 0.75%
Aetna Crossroads Variable Portfolio(2) 0.60% 0.15% 0.75%
Aetna Legacy Variable Portfolio(2) 0.60% 0.15% 0.75%
Aetna Variable Index Plus Portfolio 0.35% 0.15% 0.50%
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%
</TABLE>

- --------------------------------------------------------------------------------
FEE TABLE - 1
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FEES(1) OTHER EXPENSES TOTAL FUND
(AFTER EXPENSE (AFTER EXPENSE ANNUAL
REIMBURSEMENT) REIMBURSEMENT) EXPENSES
-------------- -------------- -----------
<S> <C> <C> <C>
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 provides administrative services to the Fund
and assumes 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 reduction 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
Portfolio Operating Expenses would have been 0.82%, 0.11%, and 0.93% for
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 investable
assets in a corresponding series ("Series") of Advisers Managers 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 - 2
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE)

Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets, you would have paid the following expenses on a $1,000
investment at the end of the applicable time period:

<TABLE>
<CAPTION>
3
1 YEAR YEARS 5 YEARS 10 YEARS
------ ------ ------- --------
<S> <C> <C> <C> <C>
Aetna Variable Fund $16 $49 $ 85 $186
Aetna Income Shares $15 $47 $ 81 $177
Aetna Variable Encore Fund $14 $43 $ 74 $162
Aetna Investment Advisers Fund, Inc. $16 $50 $ 86 $188
Aetna Ascent Variable Portfolio $18 $55 $ 95 $206
Aetna Crossroads Variable Portfolio $18 $55 $ 95 $206
Aetna Legacy Variable Portfolio $18 $55 $ 95 $206
Aetna Variable Index Plus Portfolio $15 $47 $ 82 $179
Alger American Growth Portfolio $19 $58 $100 $217
Alger American Small Cap Portfolio $20 $60 $104 $224
Calvert Responsibly Invested Balanced Portfolio $19 $58 $ 99 $215
Fidelity VIP II Contrafund Portfolio $17 $54 $ 93 $203
Fidelity VIP Equity-Income Portfolio $16 $51 $ 88 $191
Fidelity VIP Growth Portfolio $17 $54 $ 92 $201
Fidelity VIP Overseas Portfolio $19 $60 $103 $223
Franklin Government Securities Trust $18 $55 $ 95 $207
Janus Aspen Aggressive Growth Portfolio $19 $58 $101 $218
Janus Aspen Balanced Portfolio $24 $74 $127 $271
Janus Aspen Flexible Income Portfolio $21 $65 $111 $240
Janus Aspen Growth Portfolio $18 $56 $ 96 $209
Janus Aspen Short-Term Bond Portfolio $17 $54 $ 92 $201
Janus Aspen Worldwide Growth Portfolio $19 $60 $103 $222
Lexington Natural Resources Trust $25 $77 $132 $281
Neuberger & Berman Growth Portfolio $20 $61 $105 $226
Scudder International Portfolio Class A Shares $21 $65 $112 $241
TCI Growth $20 $63 $108 $233
</TABLE>

- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>

TABLE B--FOR CONTRACTS ISSUED PRIOR TO OCTOBER 1, 1996

<TABLE>
<S> <C>
MORTALITY AND EXPENSE RISK CHARGE..................................... 1.25%
ASSET-BASED SALES CHARGE. We will monitor the deductions applicable to
each Account.......................................................... 0.15%
for the total sales charges to ensure they will never exceed 8.5% of
the total Purchase
Payments actually made to the Account. The sales charges apply during
the
Accumulation Period only.
ADMINISTRATIVE EXPENSE CHARGE. We currently do not impose an
Administrative Expense................................................ 0.00%
Charge. 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...................................... 1.40%
---------
---------
</TABLE>

ANNUAL EXPENSES OF THE FUNDS

Please refer to Table A for a full illustration of the advisory fees and other
expenses applicable to the Funds.

HYPOTHETICAL ILLUSTRATION (EXAMPLE)

Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets, you would have paid the following expenses on a $1,000
investment at the end of the applicable time period:

<TABLE>
<CAPTION>
3
1 YEAR YEARS 5 YEARS 10 YEARS
------ ------ ------- --------
<S> <C> <C> <C> <C>
Aetna Variable Fund $20 $62 $106 $229
Aetna Income Shares $19 $59 $102 $220
Aetna Variable Encore Fund $18 $55 $ 95 $206
Aetna Investment Advisers Fund, Inc. $20 $62 $107 $231
Aetna Ascent Variable Portfolio $22 $67 $115 $248
Aetna Crossroads Variable Portfolio $22 $67 $115 $248
Aetna Legacy Variable Portfolio $22 $67 $115 $248
Aetna Variable Index Plus Portfolio $19 $60 $103 $222
Alger American Growth Portfolio $23 $70 $120 $258
Alger American Small Cap Portfolio $24 $72 $124 $266
Calvert Responsibly Invested Balanced Portfolio $23 $70 $119 $256
Fidelity VIP II Contrafund Portfolio $22 $66 $114 $245
Fidelity VIP Equity-Income Portfolio $20 $63 $108 $234
Fidelity VIP Growth Portfolio $21 $66 $113 $243
Fidelity VIP Overseas Portfolio $23 $72 $124 $265
Franklin Government Securities Trust $22 $68 $116 $249
Janus Aspen Aggressive Growth Portfolio $23 $71 $121 $260
Janus Aspen Balanced Portfolio $28 $86 $146 $310
Janus Aspen Flexible Income Portfolio $25 $77 $132 $281
Janus Aspen Growth Portfolio $22 $68 $117 $251
Janus Aspen Short-Term Bond Portfolio $21 $66 $113 $243
Janus Aspen Worldwide Growth Portfolio $23 $72 $123 $264
Lexington Natural Resources Trust $29 $89 $151 $320
Neuberger & Berman Growth Portfolio $24 $73 $125 $268
Scudder International Portfolio Class A Shares $25 $77 $132 $282
TCI Growth $24 $75 $128 $274
</TABLE>

- --------------------------------------------------------------------------------
FEE TABLE - 4
<PAGE>
CONDENSED FINANCIAL INFORMATION
(SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE YEARS IN THE
FOUR-YEAR PERIOD ENDED DECEMBER 31, 1995, 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. THE
ACCUMULATION UNIT VALUES AND THE PERCENTAGE CHANGE IN THE VALUE OF AN
ACCUMULATION UNIT REFLECT A MORTALITY AND EXPENSE RISK CHARGE OF 1.25% AND AN
ASSET BASED SALES CHARGE OF 0.15% FOR THE PERIODS SHOWN. AS OF THE DATE OF THIS
PROSPECTUS, FOR MASTER CONTRACTS ISSUED ON OR AFTER OCTOBER 1, 1996, THE
MORTALITY AND EXPENSE RISK CHARGE WILL REDUCE TO 1.00% DURING THE ACCUMULATION
PERIOD, AND THE ASSET BASED SALES CHARGE WILL NOT APPLY.

<TABLE>
<CAPTION>
1995 1994 1993 1992
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $10.823 $11.083 $10.531 $10.000(2)
Value at end of period $14.113 $10.823 $11.083 $10.531
Increase (decrease) in value of accumulation unit(1) 30.40% (2.35)% 5.24% 5.31%
Number of accumulation units outstanding at end of period 121,691 77,511 37,807 3,948
AETNA INCOME SHARES
Value at beginning of period $10.536 $11.107 $10.271 $10.000(2)
Value at end of period $12.283 $10.536 $11.107 $10.271
Increase (decrease) in value of accumulation unit(1) 16.59% (5.14)% 8.14% 2.71%
Number of accumulation units outstanding at end of period 20,427 14,482 4,936 416
AETNA VARIABLE ENCORE FUND
Value at beginning of period $10.523 $10.252 $10.076 $10.000(2)
Value at end of period $11.003 $10.523 $10.252 $10.076
Increase (decrease) in value of accumulation unit(1) 4.57% 2.64% 1.75% 0.76%
Number of accumulation units outstanding at end of period 19,202 12,934 3,066 547
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of period $10.900 $11.109 $10.253 $10.000(2)
Value at end of period $13.693 $10.900 $11.109 $10.253
Increase (decrease) in value of accumulation unit(1) 25.62% (1.88)% 8.35% 2.53%
Number of accumulation units outstanding at end of period 19,038 11,773 6,540 221
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.666
Increase (decrease) in value of accumulation unit(1) 6.66%
Number of accumulation units outstanding at end of period 202
AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.605
Increase (decrease) in value of accumulation unit(1) 6.05%
Number of accumulation units outstanding at end of period 243
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.573
Increase (decrease) in value of accumulation unit(1) 5.73%
Number of accumulation units outstanding at end of period 0
ALGER AMERICAN GROWTH PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.365
Increase (decrease) in value of accumulation unit(1) 3.65%
Number of accumulation units outstanding at end of period 7,966
</TABLE>

- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992
--------- --------- --------- ---------
ALGER AMERICAN SMALL CAP PORTFOLIO
<S> <C> <C> <C> <C>
Value at beginning of period $ 9.461 $10.000 $10.000(3)
Value at end of period $13.463 $ 9.461 $10.000
Increase (decrease) in value of accumulation unit(1) 42.29% (5.39)% 0.00%
Number of accumulation units outstanding at end of period 31,528 4,575 2
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
Value at beginning of period $10.839 $11.352 $10.589 $10.000(2)
Value at end of period $13.870 $10.839 $11.352 $10.589
Increase (decrease) in value of accumulation unit(1) 27.96% (4.52)% 7.21% 5.89%
Number of accumulation units outstanding at end of period 14,656 8,469 2,383 125
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.461
Increase (decrease) in value of accumulation unit(1) 4.61%
Number of accumulation units outstanding at end of period 6,415
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $11.047
Increase (decrease) in value of accumulation unit(1) 10.47%
Number of accumulation units outstanding at end of period 1,108
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.183
Increase (decrease) in value of accumulation unit(1) 1.83%
Number of accumulation units outstanding at end of period 2,541
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $ 9.954
Increase (decrease) in value of accumulation unit(1) (0.46)%
Number of accumulation units outstanding at end of period 191
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $10.294 $10.843 $10.214 $10.000(2)
Value at end of period $11.946 $10.294 $10.843 $10.214
Increase (decrease) in value of accumulation unit(1) 16.06% (5.06)% 6.16% 2.14%
Number of accumulation units outstanding at end of period 16,226 10,738 4,409 470
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.577 $10.000(4)
Value at end of period $13.296 $10.577
Increase (decrease) in value of accumulation unit(1) 25.71% 5.77%
Number of accumulation units outstanding at end of period 15,482 820
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.843
Increase (decrease) in value of accumulation unit(1) 8.43%
Number of accumulation units outstanding at end of period 160
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $10,000(7) $10.000
Value at end of period $12.054 $10.000
Increase (decrease) in value of accumulation unit(1) 20.54% 0.00%
Number of accumulation units outstanding at end of period 745 0
</TABLE>

- --------------------------------------------------------------------------------
AUV HISTORY - 2
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992
--------- --------- --------- ---------
JANUS ASPEN GROWTH PORTFOLIO
<S> <C> <C> <C> <C>
Value at beginning of period $10.000(6)
Value at end of period $10.872
Increase (decrease) in value of accumulation unit(1) 8.72%
Number of accumulation units outstanding at end of period 166
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.316
Increase (decrease) in value of accumulation unit(1) 3.16%
Number of accumulation units outstanding at end of period 24
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(8)
Value at end of period $10.952
Increase (decrease) in value of accumulation unit(1) 9.52%
Number of accumulation units outstanding at end of period 11,128
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.496 $11.261 $10.196 $10.000(2)
Value at end of period $12.095 $10.496 $11.261 $10.196
Increase (decrease) in value of accumulation unit(1) 15.24% (6.79)% 10.45% 1.96%
Number of accumulation units outstanding at end of period 8,348 7,350 2,438 165
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $11.055 $11.796 $10.927 $10.000(2)
Value at end of period $14.359 $11.055 $11.796 $10.927
Increase (decrease) in value of accumulation unit(1) 29.89% (6.28)% 7.95% 9.27%
Number of accumulation units outstanding at end of period 35,941 21,935 7,403 477
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES
Value at beginning of period $12.595 $12.883 $ 9.539 $10.000(2)
Value at end of period $13.799 $12.595 $12.883 $ 9.539
Increase (decrease) in value of accumulation unit(1) 9.56% (2.24)% 35.06% (4.81)%
Number of accumulation units outstanding at end of period 38,067 22,036 4,560 281
TCI GROWTH
Value at beginning of period $11.740 $12.046 $10.000(5)
Value at end of period $15.176 $11.740 $12.046
Increase (decrease) in value of accumulation unit(1) 29.27% (2.54)% 20.46%
Number of accumulation units outstanding at end of period 24,826 15,078 4,104
</TABLE>

(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year or
period, and dividing the result by the beginning Accumulation Unit value.

(2) The initial Accumulation Unit value was established at $10.000 on July 20,
1992.

(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 during
October 1994, when funds were first received in this option.

(5) The initial Accumulation Unit value was established at $10.000 on February
1, 1993.

(6) 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.

(7) Reflects less than a full year of performance activity. Funds were first
available in this option during March 1995.

(8) 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.

- --------------------------------------------------------------------------------
AUV HISTORY - 3
<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 Inc.

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 the 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 of 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 our other income, gains or losses. All obligations arising under the
Contracts are our general corporate obligations.

INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THE FUNDS

Purchase Payments may be allocated 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. 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 under all Plans.

If the shares of any Fund should no longer be available for investment by
the Separate Account, or if in the judgment of the Company further investments
in such shares should become inappropriate under this type of Contract, we may
cease to make such Fund shares available for investment under the Contract on a
prospective basis. The Company may, alternatively, substitute shares of another
Fund for shares already acquired. The Company reserves the right to substitute
shares of another Fund for shares already acquired without a proxy vote. Any
elimination, substitution or addition of Funds will be done in accordance with
applicable state and federal securities laws.

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)

- --------------------------------------------------------------------------------
1
<PAGE>
- -AETNA INCOME SHARES seeks to maximize total return, consistent with reasonable
risk, through investments in a diversified portfolio consisting primarily of
debt securities.(1)

- -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)

- -AETNA VARIABLE INDEX PLUS PORTFOLIO seeks to outperform the total return
performance of publicly traded common stocks represented by the S&P 500
Composite Stock Price Index ("S&P 500"), a broad-based stock market index
composed of 500 common stocks selected by the Standard & Poor's Corporation.
The Portfolio uses the S&P 500 as a comparative benchmark because it represents
approximately two-thirds of the total market value of all U.S. common stocks,
and is well known to investors.(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 such 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

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2
<PAGE>
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) (This Fund is only available under limited
circumstances.)

- -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 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).(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 generally invests in
securities believed to to have the maximum potential for long-term capital
appreciation. The Portfolio expects to be almost fully invested 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:

<TABLE>
<C> <S>
(1) Aetna Life Insurance and Annuity Company
(investment adviser); Aeltus Investment
Management, Inc. (sub- adviser)
(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 Inc. (Investment
Manager); Neuberger & Berman, L.P. (Sub-Adviser)
(9) Scudder, Stevens & Clark, Inc.
(10) Investors Research Corporation
</TABLE>

RISKS ASSOCIATED WITH INVESTMENT IN THE FUNDS. Some of the Funds may use
instruments known as

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3
<PAGE>
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 also be used for funding variable life insurance contracts
issued or sponsored 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 Plus Account is 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 Appendices II, III and IV.)

- - The Fixed Account is 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. The Fixed Account is only
available in limited circumstances. Transfers from the Fixed Account are
limited. (See Appendix V.)

PURCHASE
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- --------------------------------------------------------------------------------

CONTRACT AVAILABILITY

The Contracts are designed to fund Plans adopted by institutions of higher
education for their employees. The Plans may be (1) tax-deferred annuity
programs under Section 403(b) of the Code, and/or (2) qualified defined
contribution plans under Section 401(a) and 414(h) of the Code.

Eligible participants in the Plan seeking to invest and accumulate money for
retirement can purchase individual interests in group Contracts. The group
Contract is generally owned by the employer, and individual accounts are
established for each Participant. For each Contract, one or more Employee
Accounts will be established for contributions derived from employee salary
reduction or salary deduction (as provided for by the Plan), and one or more
Employer Accounts may be established for contributions made by the employer on
the employee's behalf.

PURCHASING INTERESTS IN THE CONTRACT

Eligible organizations may acquire both types (403(b) and 401(a)) of group
Contracts for its Plans(s) by submitting the appropriate master application
form(s) to the Company. Once we approve the application, a group Contract is
generally issued to the employer as the group

- --------------------------------------------------------------------------------
4
<PAGE>
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 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 only with the consent of the
Participant, or under limited circumstances, with the consent of the Contract
Holder pending acceptance of the form. If we agree to hold Purchase Payments for
longer than the 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 will initially be allocated to the Subaccounts or Credited
Interest Options as specified by the Participant 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.") The Code imposes a maximum limit on annual Purchase Payments which
may be excluded from a Participant's gross income. (See "Tax Status.")

RIGHTS UNDER THE CONTRACT

You have a nonforfeitable right to the value of your Employee Account. You
have a nonforfeitable right to the value of your Employer Account to the extent
of your vested percentage under the Plan as interpreted by the Contract Holder.
Subject to the terms of the Plan, you may select the investment options for your
Employer Account and your Employee Account. You may elect an Annuity option for
your Account Value; however, for your Employer and certain Employee Accounts (as
provided in the Plan), the Contract Holder must certify that you are eligible
for a distribution and that the form of Annuity is permitted under the terms of
the Plan.

RIGHT TO CANCEL

The Contract or participation under the Contract may be canceled without
penalty by returning it (or other document evidencing your interest) to the
Company with a written notice of intent to cancel. In most states, you have ten
days to exercise this right; some states allow you 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. During the
Accumulation Period, the charge is equal, on an annual basis, to 1.00% of the
daily net assets of the Subaccounts for Master Contracts issued on or after
October 1, 1996, and to 1.25% for Contracts issued prior to October 1, 1996.
During the Annuity Period, the deduction for mortality and expense risks is
equivalent to 1.25% per year.

The mortality and expense risk charge compensates the 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.

ASSET BASED SALES CHARGE. There are no deductions from Purchase Payments
for sales commissions

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5
<PAGE>

or related expenses. For Contracts issued prior to October 1, 1996, sales
commissions and expenses are advanced by the Company and recovered out of an
asset based sales charge that is deducted from the Account in an amount that
equals 0.15% on an annual basis. The deduction is made from amounts held in the
Subaccounts during the Accumulation Period only. We will monitor each Account to
ensure that the total sales charges will never exceed 8.5% of the total Purchase
Payments actually made to the Account.

If the asset based sales charges are insufficient to recover sales
commissions, such commissions would be recovered out of the Company's profits
from investment activities, including the mortality and expense risk charges
under the Contract. For sales commissions paid in connection with the sale of
the Contracts, see "Distribution."

ADMINISTRATIVE EXPENSE CHARGE. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative expense 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.

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, 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

ACCOUNT VALUE

Until the Annuity Date, the Account Value is the total dollar value of
amounts held in your 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 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, the assest based sales charge (if applicable) and the
administrative expense 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

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6
<PAGE>
Valuation Date to the next. The net investment factor for a Subaccount for any
valuation period is equal to the sum of 1.0000 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 on the preceding Valuation Date;

(e) minus a daily charge for mortality and expense risks, administrative
expenses (if applicable), and asset based sales charges (if applicable).
(See "Charges and Deductions" for further details on the charges pertaining
to your Contract.)

The net investment rate may be either positive or negative.

TRANSFERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

You can transfer amounts held under your Account from one Subaccount to
another. Transfers between the Credited Interest Options and the Subaccounts are
subject to certain restrictions. (See the Appendices.) 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 Plan, as applicable.

The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge. However, the total number of
investment options that you may select may be limited, as set forth on your
enrollment form. The minimum transfer amount is $500. Any transfer will be based
on the Accumulation Unit Value next determined after the Company receives a
valid transfer request at its Home Office.

DOLLAR COST AVERAGING PROGRAM

You may establish automated transfers of Account Values on a monthly or
quarterly basis through the Company's Dollar Cost Averaging Program. 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

All or a portion of the Account Value may be withdrawn at any time during
the Accumulation Period, subject to the withdrawal restrictions under Section
403(b) Contracts described below, and subject to limitations on withdrawals from
the Credit Interest Options. The Contract may require that the Contract Holder
certify in writing that you are eligible both as to the timing and form of
distribution. To request a withdrawal, you must properly complete a disbursement
form and send it to our Home Office. 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 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, plus the amount available for withdrawal from the Fixed Plus
Account (see Appendices II, III and IV).

- -PARTIAL WITHDRAWALS (Percentage or Specified Dollar Amount): The amount paid
will be the percentage of the Account Value or the dollar amount requested;
however, the amount available for withdrawal from the Fixed Plus Account is
limited (see Appendix II).

For any partial withdrawal, amounts will be withdrawn proportionately from
each Subaccount or Credited Interest Option in which the Account is invested,
unless you request otherwise in writing. All amounts paid will be based on
Account Values as of the next Valuation

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7
<PAGE>
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 your death, disability, attainment of age
59 1/2, separation from service or financial hardship. (See "Tax Status.")

REINVESTMENT PRIVILEGE

You may elect to reinvest all or a portion of the proceeds received from a
full withdrawal of your Account within 30 days after such withdrawal has been
made. Accumulation Units will be credited to the Account for the amount
reinvested. Reinvested amounts will be reallocated to the applicable investment
options in the same proportion as they were allocated at the time of withdrawal.
Accumulation Units will be credited to your Account based on the Accumulation
Unit Value next computed following our receipt of your 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

If allowed by the Plan, Participants may request a loan from their Account
Value during the Accumulation Period. Loans can only be made 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 your loan agreement, properly completing a loan request
form and submitting it to the Company's Home Office.

ADDITIONAL WITHDRAWAL OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

The Company offers certain withdrawal options under the Contract that are
not considered annuity options ("Additional Withdrawal Options"). To exercise
these options, your Account Value must meet the minimum dollar amounts and age
criteria applicable to that option. In addition, for Employer and certain
Employee Accounts, the Contract Holder must provide written certification that
the distribution is in accordance with the terms of the Plan. The Additional
Withdrawal Options that may be 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 plans, and pays you that amount once a year. (See "Tax Status.")

- -LEO--LIFE EXPECTANCY OPTION. LEO is a distribution option under which a portion
of your Account Value will be automatically surrendered and distributed each
year, payable over a period equal to the life expectancy of the Participant or
the joint life expectancy of the Participant and the designated Beneficiary.

Other Additional Withdrawal Options may be added from time to time.
Information relating to any of the Additional Withdrawal Options may be obtained
from your local representative or from the Company at its Home Office.

If you select one of the Additional Withdrawal Options, you 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.

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8
<PAGE>
Once you elect an Additional Withdrawal Option, you may revoke it 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 Option 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

The Contract provides that a death benefit is payable to the
Beneficiary(ies) upon the death of the Participant before the Annuity Date. If a
lump-sum distribution or an Annuity Option is elected within six months of the
Participant's death, a guaranteed death benefit is provided. For each Account,
the guaranteed death benefit is the greater of:

(a) the Account Value, plus any positive aggregate Market Value Adjustment (MVA)
that applies to amounts allocated to the Guaranteed Accumulation Account
(GAA), on the day the death notice and request for payment are received in
good order at our Home Office; or

(b) the sum of the net Purchase Payments made to each Account, minus the total
of all withdrawals or annuitizations made from the Account and any amount
allocated to the Loan Account.
If a lump-sum distribution or Annuity Option is elected six months or more
after your death, the Beneficiary will receive the Account Value, plus or minus
any MVA that would apply to any portion of the Account allocated to GAA. If a
full or partial withdrawal is made within six months after your death, the
Beneficiary will receive the Account Value, plus any positive MVA that would
apply to any portion of the Account allocated to GAA. The value of the Account
is determined as of the Valuation Date on which proof of death acceptable to us
and a request for payment are received at our Home Office.

Death benefit proceeds may be paid to the Beneficiary:

- - in a lump sum; or

- - in accordance with any of the Annuity Options available under the Contract.

The 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 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 payment to the Beneficiary within
seven days after we receive proof of death and request for payment.

The Code requires that distribution of death proceeds begin within a certain
period of time. Generally, either 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 Beneficiary is your spouse, he or she is not required to begin
distributions until the year you would have attained age 70 1/2. In no event may
payments extend beyond the life of the Beneficiary or any specified period
greater than the 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.")

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9
<PAGE>
ANNUITY PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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 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, you 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; and

- - the investment option(s) used to provide annuity payments (i.e., a fixed
annuity using the general account or any of the Subaccounts available at the
time of annuitization).

For the Employer and certain Employee Accounts, the Contract Holder must
provide written certification that the distribution is in accordance with the
terms of the Plan. (See "Rights Under the Contract.")

Annuity Payments will not begin until you have selected an Annuity Date and
an Annuity Option. Until a date and option are elected the Account will continue
in the Accumulation Period. Annuity Payments will be made monthly, unless a
Participant elects otherwise. Once Annuity Payments begin, the Annuity Option
selected may not be changed. If your Plan requires, you may also be required to
submit the appropriate joint and survivor annuity waiver and spousal consent
form(s) to us. Transfers among Subaccounts during the Annuity Period are only
permitted under Master Contracts issued on or after October 1, 1996.

ANNUITY OPTIONS

You may choose one of the following Annuity Options:

LIFETIME ANNUITY OPTIONS:

- -OPTION 1--Life Annuity--An annuity with payments ending on the Participant's
death.

- -OPTION 2--Life Annuity with Guaranteed Payments-- An 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 Annuity based upon the Lives of Two Annuitants--An annuity will
be paid during the lives of the Annuitant and a second Annuitant. You may
select either an Annuity with 100%, 66 2/3% or 50% of the payment to continue
after the first death, or an Annuity with 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 Annuity based Upon the Lives of Two Annuitants with Guaranteed
Payments--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 Participant cannot elect to receive a
lump-sum settlement.

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 some
Contracts, for amounts held in the Fixed Plus Account, the Annuity must be paid
on a fixed basis. (See Appendices II, III and IV to determine if this applies
to the Contract.)

If a nonlifetime option is elected on a variable basis, the Participant,
with the consent of the Contract Holder, may request at any time during the
payment period that the present value of all or a portion of the remaining
variable payments be paid in one sum. 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.

DURATION OF ANNUITY PAYMENTS

Annuity payments may not extend beyond (a) the life of the Participant, (b)
the joint lives of the Participant and

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10
<PAGE>
Beneficiary, (c) a period greater than the Participant's life expectancy, or (d)
a period greater than the joint life expectancies of the Participant and
Beneficiary.

AMOUNT OF EACH ANNUITY PAYMENT. The amount of each payment depends on how
you allocate your Account Value between fixed and variable payouts. For Master
Contracts issued on or after October 1, 1996, no election may be made that would
result in the first Annuity payment of less than $50, or total yearly Annuity
payments of less than $250. For Contracts issued prior to October 1, 1996, no
election may be made that would result in the first Annuity payment of less than
$25, or total yearly Annuity payments of less than $125. If your 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 discussion on the impact of
selecting an assumed net investment rate.)

CHARGES DEDUCTED DURING THE ANNUITY PERIOD

During the Annuity Period, we will make a daily deduction of 1.25% 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 a Participant 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 Participant under Option 1 or the death of the surviving
Annuitant under Option 3.

If Lifetime Option 2 or Option 4 was elected and the death of the
Participant under Option 2, or the surviving Annuitant under Option 4, occurs
prior to the end of the guaranteed minimum payment period, we will continue
payments to the beneficiary unless the beneficiary elects a lump sum.

If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments will be paid to the
Beneficiary unless the Beneficiary elects a lump sum.

If the Participant dies after Annuity payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining value must
be distributed to the Beneficiary at least as rapidly as under the original
method of distribution.

Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after acceptable proof
of death, 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 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.

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11
<PAGE>
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 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.

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) 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 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 relating to the Contracts satisfy
applicable laws, and should consult their legal counsel and tax adviser
regarding the suitability of the Contract.

MINIMUM DISTRIBUTION REQUIREMENTS. The Code has required distribution rules
for Section 403(b) and 401(a) 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) 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. For governmental or church plans, distributions
must begin by April 1 of the calendar year following the year 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 beneficiary, or over a period not greater than your life
expectancy or the joint life expectancies of you and your beneficiary.

If you die after the required minimum distribution has commenced,
distributions to your beneficiary must be made at least as rapidly as under the
method of distribution in effect at the time of your death. 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 in which
the fifth anniversary of the date of your death occurs. 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.
If the Beneficiary is your spouse, the distribution must begin on or before the
later of

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12
<PAGE>
(1) December 31 of the calendar year following the calendar year of your death,
or (2) 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 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.

SECTION 403(B) PLANS. Under Section 403(b), contributions made by public
school systems and 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.

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
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

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13
<PAGE>
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) PLANS. Section 401(a) permits certain employers to establish
various types of retirement plans for employees, and permits self-employed
individuals to establish various types of retirement plans for themselves and
for their employees. These retirement plans may permit the purchase of the
Contracts to accumulate retirement savings under the plans. 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. In addition,
Purchase Payments will be excluded from a Participant's gross income only if the
401(a) Plan meets certain nondiscrimination requirements.

MISCELLANEOUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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
on Purchase Payments made after the first year and asset-based service fees. The
average of all payments made by the Company is estimated to equal approximately
3% of the total Purchase Payments made over the life of an average Contract. The
Company may also reimburse the Distributor for certain expenses. The name of the
Distributor and the registered representative responsible for your Account are
set forth 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.")

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

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14
<PAGE>
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, asset based sales charges
(if applicable) and any administrative expense charge). The non-standardized
figures are computed in the same manner but 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 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 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 or 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.

CHANGES IN BENEFICIARY DESIGNATIONS

The designated Beneficiary may be changed at any time prior to the Annuity
Date, subject to limitations contained in the Code and other applicable laws.
Such change will not become effective until written notice of the change is
received by the Company.

MODIFICATION OF THE CONTRACT

MASTER CONTRACTS ISSUED ON OR AFTER OCTOBER 1, 1996. Only an authorized
officer of the Company may change the terms of this Contract. The Company
reserves the right to modify this Contract to meet the requirements of
applicable state and federal laws or regulations. The Company will notify the
Contract Holder and Participants in writing of any changes.

The Company may change the tables for determining the amount of Annuity
benefit payments attributable only to Contributions accepted after the effective
date of change, without Contract Holder consent. Such a change will not become
effective earlier than twelve months after (1) the effective date of the
Contract, or (2) the effective date of a previous change. The Company will
notify the Contract Holder in writing at least thirty (30) days before the
effective date of the change. The Company may not make changes which adversely
affect the Annuity benefits attributable to Contributions already made to the
Contract.

CONTRACTS ISSUED PRIOR TO OCTOBER 1, 1996. The Company may change the
Contract as required by federal or state law. In addition, the Company may, upon
thirty days written notice to the Contract Holder, make other changes 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

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15
<PAGE>

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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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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<PAGE>
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 DESCRIBED 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 three 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"). 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
federal tax penalties or mandatory income tax withholding.

By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity 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 for GAA and are reinvested, they will be applied to
the current deposit period. Amounts are proportionately reinvested 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.

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APPENDIX II
FIXED PLUS ACCOUNT
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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.

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.

Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to 6 months; or (b) as provided by
federal law.

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 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.

- --------------------------------------------------------------------------------
18
<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:

(a) due to your death, before Annuity payments begin;

(b) due to the election of an Annuity option;

(c) when the Fixed Plus Account value is $3,500 or less (and no withdrawals,
transfers or annuitizations have been made from the Account within the
prior 12 months);

(d) due to hardship from an unforeseeable emergency, as defined by the Code,
if the following conditions are met:

(1) the hardship is certified by the employer;

(2) the amount is paid directly to you; and

(3) the amount paid for all withdrawals due to hardship during the
previous 12-month period does not exceed 10% of the average value of
all Accounts during that same period; or

(e) due to your separation from service with the employer, provided that:

(1) the employer certifies that you have separated from service;

(2) the amount withdrawn is paid directly to you; and

(3) the amount paid for all partial and full withdrawals due to
separation from service during the previous 12-month period does not
exceed 20% of the average value of all Accounts under the Contract
during that same period.

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 one of the
Additional Withdrawal Options. 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. For amounts which
have been accumulating under the Fixed Plus Account, a nonlifetime annuity
option may only be elected on a fixed basis.

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 Plan, 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.

- --------------------------------------------------------------------------------
19
<PAGE>

APPENDIX III
FIXED PLUS ACCOUNT
(APPLICABLE ONLY IN LIMITED CIRCUMSTANCES)*

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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 Account for Accounts that have
not reached their tenth anniversary.

Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to 6 months; or (b) as provided by
federal law.

The Company reserves the right to limit Purchase Payment(s) and/or transfers
to the Fixed Plus Account.

FIXED PLUS ACCOUNT WITHDRAWALS

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;

- --------------------------------------------------------------------------------
20
<PAGE>

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.

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 within 6 months after the Participant's date of death before Annuity
payments begin and request for payment is received; (b) the election of an
Annuity option; or (c) if the Fixed Plus Account value is $3,500 or less and no
withdrawals, transfers, loans or annuitizations have been made from the Account
within the prior 12 months; or (d) the Participant's separation from service
with the employer (if the separation from service is certified by the employer
and the withdrawal request is received within 60 days of the date of
termination) subject to a 3% charge based on the entire Fixed Plus Account
value. If the Participant who separates from service chooses to have the five
annual payments of the Fixed Plus Account withdrawal, as described above, then
no charge will be assessed.

TRANSFERS AMONG INVESTMENT OPTIONS

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

* This Fixed Plus Account was formerly described under Appendix II of Prospectus
91846.HED-2.

- --------------------------------------------------------------------------------
21
<PAGE>

APPENDIX IV
FIXED PLUS ACCOUNT
(APPLICABLE ONLY IN LIMITED CIRCUMSTANCES)*

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

The Fixed Plus Account guarantees that amounts allocated to this option will
earn the minimum interest rate specified in the Contract. We may credit a higher
interest rate from time to time. The Company's determination of interest rates
reflects the Investment income earned on invested assets and the amortization of
any capital gains and/or losses realized on the sale of invested assets. Under
this option, we assume the risk of investment gain or loss by guaranteeing Net
Purchase Payment values and promising a minimum interest rate and Annuity
payment.

Under certain emergency conditions, we may defer payment of a Fixed Plus
Account withdrawal value (a) for a period of up to 6 months or (b) as provided
by federal law.

During any calendar year, any withdrawals requested from an Account's Fixed
Plus Account value may not exceed 20% of the Account's Fixed Plus Account Value
as of the date the withdrawal request is received in good order at our Home
Office. The withdrawal value will be reduced by any Fixed Plus Account
withdrawal(s), transfer(s) or annuitizations previously made during the calendar
year.

The 20% limit is waived if the partial withdrawal is due to annuitization or
death. The waiver upon death will only be exercised once and must occur within 6
months after the Participant's date of death.

In the event of an complete Account withdrawal, we will pay any Fixed Plus
Account withdrawal value from the Account with interest, in five annual payments
of:

1. One-fifth of the Fixed Plus Account withdrawal value minus any Fixed Plus
Account withdrawal(s), transfer(s) or annuitizations made during the
calendar year;

2. One-fourth of the remaining Fixed Plus Account withdrawal value 12 months
later;

3. One third of the remaining Fixed Plus Account withdrawal value 12 months
later;

4. One-half of the remaining Fixed Plus Account withdrawal value 12 months
later; and

5. The balance of the Fixed Plus Account withdrawal value as the fifth and
final payment 12 months later.

Once we receive notification of an Account termination, no further
withdrawal(s) or transfer(s) will be permitted from the Fixed Plus Account.

We will waive the Fixed Plus Account full surrender provision if a full
withdrawal is made due to:

(a) the Participant's death within 6 months after the Participant's date of
death before Annuity payments begin and request for payment is received;

(b) the election of an Annuity option;

(c) if the Fixed Plus Account value is $3,500 or less (and no withdrawals,
transfers or annuitizations have been made from the Account during the
calendar year), the entire Fixed Plus Account value will be paid in one
sum.

Amounts applied to the Fixed Plus Account will earn the interest rate in
effect when actually applied to the Fixed Plus Account.

- --------------------------------------------------------------------------------
22
<PAGE>

MORTALITY AND EXPENSE RISK CHARGES

The Fixed Plus 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.

TRANSFERS AMONG INVESTMENT OPTIONS

Transfers from the Fixed Plus Account to any other available investment
option(s) are allowed once in each calendar year during the Accumulation Period.
The amount that may be transferred will be up to 20% of the amount held in the
Fixed Plus Account. We will waive the 20% transfer limit 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 annuity payments
begin, the Contract Holder, on your behalf, 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 variable annuity
payments under any of the lifetime or nonlifetime Annuity Options.

* This Fixed Plus Account was formerly described under Appendix II of Prospectus
91846.ORP-2.

- --------------------------------------------------------------------------------
23
<PAGE>

APPENDIX V
FIXED ACCOUNT
(AVAILABLE ONLY IN LIMITED CIRCUMSTANCES)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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 Contract 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.

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.

TRANSFERS AMONG INVESTMENT OPTIONS

Transfers from the Fixed Account to any other available investment option(s)
are allowed in each calendar year during the Accumulation Period. The amount
which may be transferred may vary at our discretion; however, it will never be
less than 10% of the amount held under the Fixed Account. Transfers to the Fixed
Plus Account will be permitted without regard to this limitation.

By notifying us at our Home Office at least 30 days before Annuity payments
begin, you may elect to have amounts which have been accumulating under the
Fixed Account transferred to one or more of the Subaccounts available during the
Annuity Period to provide variable Annuity Payments.

CONTRACT LOANS

Loans may be made from Account Values held in the Fixed Account.

- --------------------------------------------------------------------------------
24
<PAGE>
FOR MASTER APPLICATIONS ONLY
I HEREBY ACKNOWLEDGE RECEIPT OF AN ACCOUNT C
GROUP DEFERRED VARIABLE ANNUITY PROSPECTUS
DATED , 1996 FOR OPTIONAL
RETIREMENT PROGRAMS, 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. 91846(S)-3) DATED ,
1996.

---------------------------------------------
CONTRACT HOLDER'S SIGNATURE

---------------------------------------------
DATE
Form No. 91846-3 ( /96)

- --------------------------------------------------------------------------------
<PAGE>

VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY

STATEMENT OF ADDITIONAL INFORMATION DATED ____________, 1996

Group Variable Annuity Contracts
for Optional Retirement Programs and Retirement Programs for Higher Education

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 _________, 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. Unless otherwise indicated, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Sales Material and Advertising . . . . . . . . . . . . . . . . . . . . . . 7
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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 Inc. 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, asset-based sales charge
and administrative expense charge, if any, 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 each of the
Subaccounts 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, under all
Contracts, or under all Plans. The Funds currently available under the
Contract are as follows:

<PAGE>

<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, is 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 "non-standardized
returns", calculated in an identical manner but including additional periods.

The 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 (as applicable) (e.g., mortality and expense risk
charges, asset-based sales charges and administrative expense charges).
These charges will be deducted on a pro rata basis in the case of fractional
periods.

The non-standardized figures use the same formula, but may be computed to
include monthly, quarterly, year-to-date and three-year periods.

<PAGE>

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, your Account Value upon
redemption may be more or less than your original cost.

AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED

The table below reflects the average annual standardized and non-standardized
total return quotation figures for the period ended December 31, 1995 for
each of the Subaccounts available under the Contract. For those Subaccounts
where results are not available for the full calendar period indicated, the
ercentage shown is an average annual return since inception (denoted with
an *).

FOR MASTER CONTRACTS ISSUED ON OR AFTER OCTOBER 1, 1996
(ASSUMES A MORTALITY AND EXPENSE RISK CHARGE OF 1.00%)

Aetna Variable Fund 30.94% 12.39% 12.58% 30.94% 10.70% 12.39% 12.58% 04/30/75
- ------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 17.07% 8.78% 8.80% 17.07% 6.58% 8.78% 8.80% 06/01/78
- ------------------------------------------------------------------------------------------------------------------------
Aetna Variable
Encore Fund 5.00% 3.66% 5.18% 5.00% 3.40% 3.66% 5.18% 09/01/75
- ------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers
Fund, Inc. 25.97% 10.78% 9.66%* 25.97% 10.58% 10.78% 9.66%* 06/23/89
- ------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable
Portfolio 9.96%* n/a n/a 9.96%* n/a n/a n/a 07/03/95
- ------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable
Portfolio 8.79%* n/a n/a 8.79%* n/a n/a n/a 07/03/95
- ------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable
Portfolio 7.73%* n/a n/a 7.73%* n/a n/a n/a 07/03/95
- ------------------------------------------------------------------------------------------------------------------------
Alger American Growth
Portfolio 35.02% 20.52% 18.25%* 35.02% 18.03% 20.52% 18.25%* 01/08/89
- ------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap
Portfolio 42.88% 19.21% 21.26%* 42.88% 14.62% 19.21% 21.26%* 09/21/88
- ------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested
Balanced Portfolio 28.49% 10.14% 8.99%* 28.49% 9.86% 10.14% 8.99%* 09/30/86
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund
Portfolio 38.25%* n/a n/a 38.25%* n/a n/a n/a 01/03/95
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income
Portfolio 33.76% 20.12% 12.27%* 33.76% 18.42% 20.12% 12.27%* 10/22/86
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth
Portfolio 34.03% 19.58% 13.84%* 34.03% 16.17% 19.58% 13.84%* 11/07/86
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas
Portfolio 8.59% 7.05% 6.28%* 8.59% 14.15% 7.05% 6.28%* 02/13/87
- ------------------------------------------------------------------------------------------------------------------------
Franklin Government
Securities Trust 16.53% 7.64% 8.14%* 16.53% 5.79% 7.64% 8.14%* 05/30/89
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth
Portfolio 26.22% 26.33%* n/a 26.22% 26.33%* n/a n/a 09/13/93
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

FOR MASTER CONTRACTS ISSUED PRIOR TO OCTOBER 1, 1996
(ASSUMES A MORTALITY AND EXPENSE RISK CHARGE OF 1.25%
AND AN ASSET BASED SALES CHARGE OF 0.15%)

FUND
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 30.40% 11.83% 12.07% 30.40% 10.25% 11.83% 12.07% 04/30/75
- ------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 16.59% 8.32% 8.35% 16.59% 6.15% 8.32% 8.35% 06/01/78
- ------------------------------------------------------------------------------------------------------------------------
Aetna Variable
Encore Fund 4.57% 3.24% 4.75% 4.57% 2.98% 3.24% 4.75% 09/01/75
- ------------------------------------------------------------------------------------------------------------------------
Aetna Investment
Advisers Fund, Inc. 25.45% 10.29% 9.18%* 25.45% 10.12% 10.29% 9.18%* 06/23/89
- ------------------------------------------------------------------------------------------------------------------------
Aetna Ascent
Variable Portfolio 9.73%* n/a n/a 9.73%* n/a n/a n/a 07/03/95
- ------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads
Variable Portfolio 8.57%* n/a n/a 8.57%* n/a n/a n/a 07/03/95
- ------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable
Portfolio 7.61%* n/a n/a 7.61%* n/a n/a n/a 07/03/95
- ------------------------------------------------------------------------------------------------------------------------
Alger American
Growth Portfolio 34.51% 20.03% 17.77%* 34.51% 17.56% 20.03% 17.77%* 01/08/89
- ------------------------------------------------------------------------------------------------------------------------
Alger American Small
Cap Portfolio 42.29% 19.14% 21.06%* 42.29% 14.82% 19.14% 21.06%* 09/21/88
- ------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested
Balanced Portfolio 27.96% 9.66% 8.53%* 27.96% 9.41% 9.66% 8.53%* 09/30/86
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II
Contrafund Portfolio 37.82%* n/a n/a 37.82%* n/a n/a n/a 01/03/95
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income
Portfolio 33.21% 19.63% 11.81%* 33.21% 17.93% 19.63% 11.81%* 10/22/86
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth
Portfolio 33.48% 19.09% 13.06%* 33.48% 15.70% 19.09% 13.06%* 11/07/86
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas
Portfolio 8.15% 6.61% 5.85%* 8.15% 13.68% 6.61% 5.85%* 02/13/87
- ------------------------------------------------------------------------------------------------------------------------
Franklin Government
Securities Trust 16.06% 7.23% 7.72%* 16.06% 5.36% 7.23% 7.72%* 05/30/89
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive
Growth Portfolio 25.71% 25.82%* n/a 25.71% 25.82%* n/a n/a 09/13/93
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced
Portfolio 23.05% 12.32%* n/a 23.05% 12.32%* n/a n/a 09/13/93
- ------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible
Income Portfolio 22.13% 8.13%* n/a 22.13% 8.13%* n/a n/a 09/13/93
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

<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.

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.

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.

<PAGE>

EXAMPLE:

Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Contract or Account and that
the value of an Accumulation Unit for the tenth Valuation 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 in which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be
20.414. The value of this number of Annuity Units will be paid in each
subsequent month.

If the net investment factor with respect to the appropriate 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 in 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
(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

<PAGE>

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 thetsSeparate Account's financial statements and the review of filings
made with the SEC.

<PAGE>

FINANCIAL STATEMENTS

VARIABLE ANNUITY ACCOUNT C

INDEX

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
Condensed Financial Information. . . . . . . . . . . . . . . . S-12

S-1

<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

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 NET
AMOUNT COMPANIES COMPANIES AMOUNT
--------- ------------- ------------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
1995
Premiums:
Life Insurance....................................... $ 28.8 $ 8.6 $ 28.0 $ 48.2
Accident and Health Insurance........................ 7.5 7.5 -- --
Annuities............................................ 82.1 -- 0.5 82.6
--------- ----- ----- ---------
Total earned premiums................................ $ 118.4 $ 16.1 $ 28.5 $ 130.8
--------- ----- ----- ---------
--------- ----- ----- ---------

1994
Premiums:
Life Insurance....................................... $ 27.3 $ 6.0 $ 32.8 $ 54.1
Accident and Health Insurance........................ 9.3 9.3 -- --
Annuities............................................ 69.9 -- 0.2 70.1
--------- ----- ----- ---------
Total earned premiums................................ $ 106.5 $ 15.3 $ 33.0 $ 124.2
--------- ----- ----- ---------
--------- ----- ----- ---------
1993
Premiums:
Life Insurance....................................... $ 22.4 $ 5.6 $ 33.3 $ 50.1
Accident and Health Insurance........................ 12.9 12.9 -- --
Annuities............................................ 31.3 -- 0.7 32.0
--------- ----- ----- ---------
Total earned premiums................................ $ 66.6 $ 18.5 $ 34.0 $ 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>

STATEMENT OF ADDITIONAL INFORMATION

VARIABLE ANNUITY ACCOUNT C

VARIABLE ANNUITY CONTRACTS

ISSUED BY

AETNA LIFE INSURANCE AND ANNUITY COMPANY
HARTFORD, CONNECTICUT

Form No. 91846(S)-3 ALIAC Ed. ______________, 1996
<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(1)
(2) Not applicable
(3.1) Form of Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesale Agreement and Related Selling
Agreement(2)
(4.1) Form of Variable Annuity Contract (G-CDA-IB(ATORP)) and
Endorsement (EGET-IC(R))(3)
(4.2) Form of Variable Annuity Contract and Certificate (G-CDA-95(TORP)
and (GTCC-95(TORP))(3)
(4.3) Form of Variable Annuity Contract (G-CDA-IB(AORP))(3)
(4.4) Form of Variable Annuity Contract and Certificate (G-CDA-95(ORP)
and (GTCC-95(ORP))(3)
(4.5) Form of Variable Annuity Contract (G-CDA-96(TORP))
(4.6) Endorsement (GET/96) to Variable Annuity Contracts and
Certificates G-CDA-95(TORP), GTCC-95(TORP), G-CDA-95(ORP), GTCC-
95(ORP)
(5) Form of Variable Annuity Contract Application (300-MOP-IB)(4)

<PAGE>

(6) Certification of Incorporation and By-Laws of Depositor(5)
(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(2)
(8.2) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Calvert Asset Management Company (Calvert
Responsibly Invested Balanced Portfolio, formerly Calvert
Socially Responsible Series) dated March 13, 1989 and amended
December 27, 1993(2)
(8.3) Second Amendment dated January 1, 1996 to Fund Participation
Agreement between Aetna Life Insurance and Annuity Company and
Calvert Asset Management Company (Calvert Responsibly Invested
Balanced Portfolio, formerly Calvert Socially Responsible Series)
dated March 13, 1989 and amended December 27, 1993(6)
(8.4) 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(2)
(8.5) 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(2)
(8.6) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investments Institutional Operations Company
dated as of November 1, 1995(6)
(8.7) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Franklin Advisers, Inc. dated January 31,
1989(2)
(8.8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Janus Aspen Series dated April 19, 1994 and
amended March 1, 1996(2)
(8.9) 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(2)
(8.10) 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(2)
(8.11) 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(2)
(8.12) Amendment dated as of February 20, 1996 to Fund Participation
Agreement between Aetna Life Insurance and Annuity Company and
Scudder Variable Life Investment Fund dated April 27, 1992 as
amended February 19, 1993 and August 13, 1993(6)
(8.13) 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(2)

<PAGE>

(9) Opinion of Counsel(7)
(10.1) Consent of Independent Auditors
(10.2) Consent of Counsel
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Data(8)
(14) Not applicable
(15.1) Powers of Attorney(9)
(15.2) Authorization for Signatures(2)
(27) Financial Data Schedule(3)

1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
22, 1996.
2. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
12, 1996.
3. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-91846), as filed electronically on April
15, 1996.
4. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-91846), as filed on May 1, 1995.
5. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 (File No. 33-60477), as filed electronically on April
15, 1996.
6. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-88720), as filed electronically on June
28, 1996.
7. Incorporated by reference to Registrant's 24f-2 Notice for fiscal year ended
December 31, 1995, as filed electronically on February 29, 1996.
8. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-91846), as filed electronically on August
16, 1995.
9. Incorporated by reference to Pre-Effective Amedment No. 1 to Registration
Statement on Form N-4 (File No. 333-01107), as filed electronically on
August 2, 1996.

<PAGE>

ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR

NAME AND PRINCIPAL
BUSINESS ADDRESS* POSITIONS AND OFFICES WITH DEPOSITOR

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
Deborah Koltenuk 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

* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.

ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT

Incorporated herein by references to Item 26 of Pre-Effective Amendment No.
1 to the Registration Statement on Form N-1A (File No. 333-01107), as filed
electronically on August 2, 1996.

<PAGE>

ITEM 27. NUMBER OF CONTRACT OWNERS

As of May 31,1996, there were 581,139 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 Aetna Variable Encore Fund, Aetna Variable
Fund, Aetna Series Fund, Inc., Aetna Generation Portfolios, Inc., Aetna
Income Shares, Aetna Investment Advisers Fund, Inc., Aetna GET Fund,
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

<PAGE>

Fund, and Aetna Series Fund, Inc. ALIAC is also the depositor of
Variable Life Account B and Variable Annuity Accounts B, C and G.

(b) See Item 25 regarding the Depositor.

(1) (2) (3) (4) (5)

NAME OF NET UNDERWRITING COMPENSATION
PRINCIPAL DISCOUNTS AND ON REDEMPTION BROKERAGE
UNDERWRITER COMMISSIONS OR ANNUITIZATION COMMISSIONS COMPENSATION*
- ----------- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Aetna Life $1,830,629 $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 Variable Annuity
Account C.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules under it relating to the securities
described in and issued under this Registration Statement are located at the
home office of the Depositor as follows:

Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156

ITEM 31. MANAGEMENT SERVICES

Not applicable

ITEM 32. UNDERTAKINGS

Registrant hereby undertakes:

(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;

<PAGE>

(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and

(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.

(d) The Company hereby represents that it is relying upon and complies with
the provisions of Paragraphs (1) through (4) of the SEC Staff's No-
Action Letter dated November 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) PARA78,904 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.
6 to its Registration Statement on Form N-4 (File No. 33-91846) to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Hartford, State of Connecticut, on the 5th day of August, 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. 6 to the Registration Statement on Form N-4 (File No. 33-91846)
has been signed by the following persons in the capacities and on the dates
indicated.

SIGNATURE TITLE DATE
- --------- ----- ----

Daniel P. Kearney* Director and President )
- --------------------- (principal executive officer) )
Daniel P. Kearney )
)
Timothy A. Holt* Director and Chief )August
- --------------------- Financial Officer )5, 1996
Timothy A. Holt )
)
Christopher J. Burns* Director )
- --------------------- )
Christopher J. Burns )
)
Laura R. Estes* Director )
- --------------------- )
Laura R. Estes )
)

<PAGE>

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 )
)
Deborah Koltenuk* Vice President and Treasurer, )
- --------------------- Corporate Controller )
Deborah Koltenuk )

By: /s/ Susan E. Bryant
--------------------------------
Susan E. Bryant
*Attorney-in-Fact

<PAGE>

VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX

EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- ----

99-B.1 Resolution of the Board of Directors of Aetna Life Insurance *
and Annuity Company establishing Variable Annuity Account C

99-B.3.1 Form of Broker-Dealer Agreement *

99-B.3.2 Alternative Form of Wholesale Agreement and Related Selling *
Agreement

99-B.4.1 Form of Variable Annuity Contract (G-CDA-IB(ATORP)) *

99-B.4.2 Form of Variable Annuity Contract and Certificate *
(G-CDA-95(TORP) and (GTCC-95(TORP))

99-B.4.3 Form of Variable Annuity Contract (G-CDA-IB(AORP)) *

99-B.4.4 Form of Variable Annuity Contract and Certificate *
(G-CDA-95(ORP) and (GTCC-95(ORP))

99-B.4.5 Form of Variable Annuity Contract (G-CDA-96(TORP)) ___

99-B.4.6 Endorsement (GET/96) to Variable Annuity Contracts and ___
Certificates G-CDA95(TORP), GTCC-95(TORP),
G-CDA-95(ORP), and GTCC-95(ORP)

99-B.5 Form of Variable Annuity Contract Application (300-MOP-IB) *

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 Responsibly Invested Balanced Portfolio, formerly
Calvert Socially Responsible Series) dated March 13, 1989 and
amended December 27, 1993

*Incorporated by reference

<PAGE>

EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- ----

99-B.8.3 Second Amendment dated January 1, 1996 to Fund Participation *
Agreement between Aetna Life Insurance and Annuity Company
and Calvert Asset Management Company (Calvert Responsibly
Invested Balanced Portfolio, formerly Calvert Socially
Responsible Series) dated March 13, 1989 and amended
December 27, 1993

99-B.8.4 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.8.5 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

99-B.8.6 Service Agreement between Aetna Life Insurance and Annuity *
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995

99-B.8.7 Fund Participation Agreement between Aetna Life Insurance and *
Annuity Company and Franklin Advisers, Inc. dated January 31, 1989

99-B.8.8 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.8.9 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.8.10 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

*Incorporated by reference

<PAGE>

EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- ----

99-B.8.11 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.8.12 Amendment dated as of February 20, 1996 to Fund Participation *
Agreement between Aetna Life Insurance and Annuity Company
and Scudder Variable Life Investment Fund dated April 27, 1992
as amended February 19, 1993 and August 13, 1993

99-B.8.13 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 ____

99-B.13 Computation of Performance Data *

99-B.15.1 Powers of Attorney *

99-B.15.2 Authorization for Signatures *

27 Financial Data Schedule *

*Incorporated by reference

<PAGE>

A B C
-----------------------------------------------------------------
D E F AETNA LIFE INSURANCE AND ANNUITY COMPANY
HOME OFFICE: 151 Farmington Avenue
G H I Hartford, Connecticut 06156
(800) 525-4225

Aetna Life Insurance and Annuity Company, herein called
Aetna, agrees to pay the benefits stated in this Contract.

SPECIFICATIONS
- --------------------------------------------------------------------------------
Plan

- --------------------------------------------------------------------------------
Type of Plan

- --------------------------------------------------------------------------------
Contract Holder

- --------------------------------------------------------------------------------
Contract No.

- --------------------------------------------------------------------------------
Effective Date

- --------------------------------------------------------------------------------
This Contract is Delivered in and is Subject to the Laws of that
Jurisdiction

THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN PARTS III AND V.

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.

Signed at the Home Office on the Effective Date.

/s/ Dan Keaney /s/ Susan W. Schechter
- ------------------------- ----------------------------

President Secretary

Group Combination Annuity Contract
Nonparticipating

ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP ANNUITY CONTRACT, WHEN BASED ON
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED
AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT
FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN
INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA
DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.

<PAGE>

SPECIFICATIONS

- --------------------------------------------------------------------------------
GUARANTEED There is a guaranteed interest rate for Contribution(s) held
INTEREST RATE in the Fixed Plus Account and the GA Account. (See Contract
Schedule I.)

- --------------------------------------------------------------------------------
DEDUCTIONS FROM There will be deductions for mortality and expense risks.
THE SEPARATE There also may be deductions for administrative charges and
ACCOUNT asset based sales charges. (See 3.06 and 5.06.)

- --------------------------------------------------------------------------------
DEDUCTION FROM Contribution(s) are subject to a deduction for premium taxes,
CONTRIBUTION(S) if any. (See 3.02.)

This Contract is a legal contract. This Contract and any attached document and
subsequent endorsements constitutes the entire legal relationship between Aetna
and the Contract Holder.

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.

<PAGE>

CONTRACT SCHEDULE I
ACCUMULATION PERIOD

SEPARATE ACCOUNT
- --------------------------------------------------------------------------------

SEPARATE ACCOUNT: Variable Annuity Account C

CHARGES TO SEPARATE A daily charge is deducted from any portion of the
ACCOUNT: Current Value allocated to the Separate Account. The
daily charge is at an annual effective rate of 1.25%
for Annuity mortality and expense risks, 0.15% for
asset based sales charge and a daily administrative
charge which will not exceed 0.25% on an annual basis.

FIXED PLUS ACCOUNT
- --------------------------------------------------------------------------------

MINIMUM GUARANTEED 3% (effective annual rate of return).
INTEREST RATE: Beginning on the tenth anniversary of the effective
date of an Individual Account, Aetna may credit amounts
with an interest rate that is 0.25% higher than the
then-declared interest rate for Individual Accounts
before the tenth anniversary.

PARTIAL WITHDRAWAL: The 20% limit applicable to partial withdrawal from the
Fixed Plus Account will be waived when the withdrawal
is:

(a) due to the Participant's death, (within six (6)
months of the Participant's date of death), before
Annuity payments begin. This partial withdrawal
may only be exercised once; or

(b) used to purchase Annuity benefits.

GUARANTEED ACCUMULATION ACCOUNT (GA ACCOUNT)
- --------------------------------------------------------------------------------

MINIMUM GUARANTEED 3% (effective annual rate of return).
INTEREST RATE:

<PAGE>

CONTRACT SCHEDULE I
ACCUMULATION PERIOD (CONT'D)

SEPARATE ACCOUNT, FIXED PLUS ACCOUNT AND GA ACCOUNT
- --------------------------------------------------------------------------------

LOANS:

LOAN INTEREST RATE: (a) Plans subject to Title I of the Employee Retirement
Insurance Security Act of 1974 (ERISA): A Loan
Interest Rate is set on the first business day of
each month. For each loan, the initial Loan
Interest Rate is equal to the Monthly Average
Corporates for the calendar month beginning two
months before the calendar month in which the Loan
Effective Date occurs. The initial Loan Interest
Rate is effective for a period of not less than
three months and not more than one year. The
period is specified in the loan agreement. For
each period, the Loan Interest Rate is adjusted if
the new rate is at least 0.5% higher or lower than
the previous rate. The Participant will receive
reasonable notification of any change to the Loan
Interest Rate.

(b) Plans not subject to ERISA: 6% on an annual basis.

SYSTEMATIC WITHDRAWAL The Specified Payment may not be greater than 20% of
OPTION (SWO): the Individual Account's Current Value at the time of
election.

The Specified Period may not be less than five years.

The Specified Percentage may not be greater than 20%.

ESTATE CONSERVATION
OPTION (ECO):

LIFE EXPECTANCY OPTION
(LEO):

SEE SECTION 1. - DEFINITIONS FOR EXPLANATIONS.

<PAGE>

CONTRACT SCHEDULE II
ANNUITY PERIOD

SEPARATE ACCOUNT
- --------------------------------------------------------------------------------

TRANSFERS: Maximum number of allowable transfers in the Annuity
Period is 4.

CHARGES TO SEPARATE A daily charge at an annual effective rate of 1.25% for
ACCOUNT: Annuity mortality and expense risks. The
administrative charge is established upon election of
an Annuity option. This charge will not exceed 0.25%.

VARIABLE ANNUITY If a Variable Annuity is chosen, an assumed annual net
ASSUMED ANNUAL return rate of 5.0% may be elected. If 5.0% is not
NET RETURN RATE: elected, Aetna will use an assumed annual net return
rate of 3.5%.

The assumed annual net return rate factor for 3.5% per
year is 0.9999058.

The assumed annual net return rate factor for 5.0% per
year is 0.9998663.

If the portion of a Variable Annuity payment for any
Fund is not to decrease, the Annuity return factor
under the Separate Account for that Fund must be:

(a) 4.75% on an annual basis plus an annual return of
up to 0.25% to offset the administrative charge
set at the time Annuity payments commence if an
assumed annual net return rate of 3.5% is chosen;
or

(b) 6.25% on an annual basis plus an annual return of
up to 0.25% to offset the administrative charge
set at the time Annuity payments commence, if an
assumed annual net return rate of 5% is chosen.

ANNUITY OPTION: Under the option "Payments for a Stated Period of
Time":

For amounts invested in the GA Account or one or more
of the Fund(s), the number of years must be at least
five (5) and not more than thirty (30) and the Annuity
may be a Fixed or Variable Annuity.

For amounts invested in the Fixed Plus Account, the
number of years must be at least five (5) and not more
than thirty (30) and the Annuity must be a Fixed
Annuity.

FIXED ANNUITY
- --------------------------------------------------------------------------------

MINIMUM GUARANTEED 3% (effective annual rate of return).
INTEREST RATE:

See Section 1. - DEFINITIONS for explanations.

iii

<PAGE>

TABLE OF CONTENTS

I. DEFINITIONS
- --------------------------------------------------------------------------------
PAGE
1.01 Accumulation Period. . . . . . . . . . . . . . . . . . . . . . . . 6
1.02 Adjusted Current Value . . . . . . . . . . . . . . . . . . . . . . 6
1.03 Annuitant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.04 Annuity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.05 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.06 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.07 Contract Holder. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.08 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.09 Current Value. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.10 Deposit Period . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.11 Fixed Plus Account . . . . . . . . . . . . . . . . . . . . . . . . 6
1.12 Fixed Plus Account Guaranteed Interest Rate. . . . . . . . . . . . 7
1.13 Fixed Annuity. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.14 Fund(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.15 General Account. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.16 Guaranteed Accumulation Account (GA Account) . . . . . . . . . . . 7
1.17 GA Account Guaranteed Interest Rate. . . . . . . . . . . . . . . . 7
1.18 Guaranteed Term. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.19 Individual Account . . . . . . . . . . . . . . . . . . . . . . . . 8
1.20 Loan Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.21 Loan Effective Date. . . . . . . . . . . . . . . . . . . . . . . . 8
1.22 Loan Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . 8
1.23 Market Value Adjustment (MVA). . . . . . . . . . . . . . . . . . . 8
1.24 Matured Term Value . . . . . . . . . . . . . . . . . . . . . . . . 8
1.25 Matured Term Value Transfer. . . . . . . . . . . . . . . . . . . . 8
1.26 Maturity Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.27 Monthly Average Corporates . . . . . . . . . . . . . . . . . . . . 9
1.28 Net Contribution . . . . . . . . . . . . . . . . . . . . . . . . . 9

<PAGE>

1.29 Nonunitized Separate Account . . . . . . . . . . . . . . . . . . . 9
1.30 Participant. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.31 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.32 Reinvestment . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.33 Separate Account . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.34 Fund Transfers During the Accumulation Period. . . . . . . . . . . 9
1.35 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.36 Valuation Period . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.37 Variable Annuity . . . . . . . . . . . . . . . . . . . . . . . . . 10

II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------

2.01 Change of Contract . . . . . . . . . . . . . . . . . . . . . . . . 10
2.02 Change of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.03 Nonparticipating Contract. . . . . . . . . . . . . . . . . . . . . 10
2.04 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.05 State Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.06 Control of Contract. . . . . . . . . . . . . . . . . . . . . . . . 11
2.07 Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . 12
2.08 Misstatements and Adjustments. . . . . . . . . . . . . . . . . . . 12
2.09 Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Grace Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.11 Individual Certificates. . . . . . . . . . . . . . . . . . . . . . 12

III. CONTRIBUTIONS, CURRENT VALUE, AND WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------

3.01 Limitations on Contributions . . . . . . . . . . . . . . . . . . . 12
3.02 Net Contribution(s). . . . . . . . . . . . . . . . . . . . . . . . 12
3.03 Experience Credits . . . . . . . . . . . . . . . . . . . . . . . . 13
3.04 Fund Record Units. . . . . . . . . . . . . . . . . . . . . . . . . 13
3.05 Fund Record Unit Value . . . . . . . . . . . . . . . . . . . . . . 13
3.06 Fund Net Return Factors. . . . . . . . . . . . . . . . . . . . . . 13

<PAGE>

3.07 Market Value Adjustment. . . . . . . . . . . . . . . . . . . . . . 14
3.08 Transfer(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.09 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.10 Notice to the Participant. . . . . . . . . . . . . . . . . . . . . 18
3.11 Withdrawal Restrictions. . . . . . . . . . . . . . . . . . . . . . 18
3.12 Manner and Timing of Distributions . . . . . . . . . . . . . . . . 19
3.13 Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.14 Partial Withdrawal from the Fixed Plus Account . . . . . . . . . . 20
3.15 Payment of Fixed Plus Account Full Withdrawal. . . . . . . . . . . 20
3.16 Payment of Minimum Current Value . . . . . . . . . . . . . . . . . 21
3.17 Amount Payable at Death (Before Annuity Payments Start). . . . . . 21
3.18 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . 22

IV. NON-ANNUITY DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------

4.01 Distribution Options . . . . . . . . . . . . . . . . . . . . . . . 22
4.02 Estate Conservation Option . . . . . . . . . . . . . . . . . . . . 23
4.03 Systematic Withdrawal Option . . . . . . . . . . . . . . . . . . . 24
4.04 Life Expectancy Option . . . . . . . . . . . . . . . . . . . . . . 24

V. ANNUITY PROVISIONS
- --------------------------------------------------------------------------------

5.01 Choices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.02 Terms of Annuity Options . . . . . . . . . . . . . . . . . . . . . 27
5.03 Death Provision. . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.04 Fund Annuity Units . . . . . . . . . . . . . . . . . . . . . . . . 28
5.05 Fund Annuity Unit Value. . . . . . . . . . . . . . . . . . . . . . 28
5.06 Fund Annuity Net Return Factor . . . . . . . . . . . . . . . . . . 28
5.07 Fund Transfers During the Annuity Period . . . . . . . . . . . . . 29
5.07 Annuity Options. . . . . . . . . . . . . . . . . . . . . . . . . . 29

<PAGE>

I. DEFINITIONS
- --------------------------------------------------------------------------------

1.01 ACCUMULATION PERIOD: The period during which Net Contribution(s) are
applied to an Individual Account.

1.02 ADJUSTED CURRENT The Current Value (See 1.09) of an Individual
VALUE: Account (See 1.19) plus or minus any applicable
aggregate GA Account Market Value Adjustment. (See
3.07).

1.03 ANNUITANT: If an Annuity provides lifetime benefits, the
person whose life expectancy determines the amount
and/or duration of Annuity benefit payments.

1.04 ANNUITY: Payment of an income under the Annuity Provisions
of Section V:

(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).

1.05 BENEFICIARIES: The person(s) named to receive any benefits which
remain under the Contract after the Participant's
death. Participant(s) designate a Beneficiary for
their Individual Account(s). (See 2.07)

1.06 CODE: The Internal Revenue Code of 1986, as amended.

1.07 CONTRACT HOLDER: The entity, named on the cover of this Contract,
to which the Contract is issued.

1.08 CONTRIBUTION: A payment received at Aetna's Home Office and
allocated to this Contract.

1.09 CURRENT VALUE: For an Individual Account (See 1.19), the Current
Value is the total of:

(a) The amount, if any, in the Fixed Plus Account,
with interest earned to date;
(b) The amount, if any, in the GA Account, with
interest earned to date; and
(c) The value of all Fund record units (See 3.05),
if any, as of the most recent Valuation
Period.

1.10 DEPOSIT PERIOD: A calendar month, a calendar quarter, or any other
period of time specified by Aetna during which Net
Contribution(s), Transfers and Reinvestments are
accepted into the GA Account for one or more
Guaranteed Terms.

1.11 FIXED PLUS ACCOUNT: If offered as an investment option under the Plan
(see Contract Schedule) the Fixed Plus Account is
an accumulation option with a guaranteed minimum
interest rate. Aetna may credit a higher rate
which is not guaranteed. The portion that may be
withdrawn or transferred in a 12 month period is
restricted (See 3.08, 3.14 and 3.15).

<PAGE>

1.12 FIXED PLUS ACCOUNT If the Fixed Plus Account is an investment option
GUARANTEED INTEREST under the Plan (see Contract Schedule) then Aetna
RATE: will add interest at an annual rate no less than
that shown on Contract Schedule I on any Net
Contribution(s) to the Fixed Plus Account. Aetna
may add interest at a higher rate determined by
its Board of Directors.

1.13 FIXED ANNUITY: An Annuity with payments that do not vary in
amount.

1.14 FUND(S): The open-end registered management investment
companies whose shares are purchased by the
Separate Account to Fund the benefits provided by
the Contract.

1.15 GENERAL ACCOUNT: The account holding the assets of Aetna, other
than those assets held in Aetna's Separate
Account(s) and Nonunitized Separate Account(s).

1.16 GUARANTEED ACCUMULATION If offered as an investment option under the Plan
ACCOUNT (GA ACCOUNT): (see Contract Schedule) the Guaranteed
Accumulation Account (GA Account) is an
accumulation option where Aetna guarantees
stipulated rate(s) of interest for a specified
period of time. All assets of Aetna, including
amounts in the Nonunitized Separate Account, are
available to meet the guarantees for the GA
Account.

1.17 GA ACCOUNT GUARANTEED If the GA Account is an investment option under
INTEREST RATE: the Plan (see Contract Schedule) then Aetna will
declare the interest rate(s) applicable to a
specific Guaranteed Term at the start of the
Deposit Period for that Guaranteed Term. The
rate(s) are guaranteed by Aetna for that Deposit
Period and the ensuing Guaranteed Term. The
Guaranteed Interest Rates are annual effective
yields. That is, interest is credited at a rate
that will produce the Guaranteed Interest Rate
over the period of a year. No Guaranteed Interest
Rate will ever be less than the Minimum Guaranteed
Interest Rate shown on Contract Schedule 1.

For Guaranteed Terms of one year or less, one
Guaranteed Interest Rate is credited for the full
Guaranteed Term. For longer Guaranteed Terms, an
initial Guaranteed Interest Rate is credited from
the date of deposit to the end of a specified
period within the Guaranteed Term. There may be
different Guaranteed Interest Rate(s) declared for
subsequent specified time intervals throughout the
Guaranteed Term.

1.18 GUARANTEED TERM: The period of time for which GA Account Guaranteed
Interest Rates are guaranteed on Net
Contributions, Transfers and Reinvestments made
into a current Deposit Period for the GA Account.
Such period begins on the day following the close
of the Deposit Period and ends on the designated
Maturity Date. Guaranteed Terms are offered at
Aetna's discretion for various lengths of time
ranging up to and including ten years and are
classified as follows:

SHORT-TERM. Three (3) or fewer years. Amounts
allocated to a short-term Term are held in the
General Account.

<PAGE>

1.18 GUARANTEED TERM LONG-TERM. More than three (3) years, but not more
(CONT'D): than ten (10). Amounts allocated to a long-term
Term are held in the Nonunitized Separate Account.

During a Deposit Period, Aetna may make available
any number of Guaranteed Terms. The Participant
may allocate Net Contributions and Transfers into
any or all of the available Guaranteed Terms.

1.19 INDIVIDUAL ACCOUNT: This Contract is issued to the Contract Holder.
However, Aetna will maintain at least two
Individual Accounts for each Participant to keep a
record of Current Value (See 1.09) and
transactions. These are:

(a) An Employer Account: This Individual Account
will be credited with employer Net
Contribution(s) and transferred amounts of
403(b) funds, attributable to employer
contributions including after tax
contributions; and

(b) An Employee Account: This Individual Account
will be credited with employee Net
Contribution(s) and transferred amounts of
403(b) funds, attributable to employee
contributions including after tax
contributions.

1.20 LOAN ACCOUNT: For each loan taken by a Participant, the loan
amount transferred from the investment options is
credited to the Loan Account.

1.21 LOAN EFFECTIVE DATE: The date on which Aetna receives a loan agreement
in good order at its home office.

1.22 LOAN INTEREST RATE: The interest rate Aetna charges on a loan. (see
Contract Schedule).

1.23 MARKET VALUE ADJUSTMENT An adjustment to the amount withdrawn or
(MVA): Transferred from an GA Account Guaranteed Term
prior to the end of that Guaranteed Term. The
adjustment reflects the change in the value of the
investment due to changes in interest rates since
the date of deposit and is computed using the
formula given in 3.07. The adjustment is
expressed as a percentage of each dollar being
withdrawn.

1.24 MATURED TERM VALUE: The amount payable on a GA Account Guaranteed
Term's Maturity Date.

1.25 MATURED TERM VALUE During the calendar month following a GA Account
TRANSFER: Maturity Date, the Participant may notify Aetna's
Home Office in writing to Transfer or withdraw all
or part of the Matured Term Value, plus interest
at the new Guaranteed Rate accrued thereon, from
the GA Account without an MVA. This provision only
applies to the first such written request received
from the Participant during this period for any
Matured Term Value.

1.26 MATURITY DATE: The last day of a GA Account Guaranteed Term.

<PAGE>

1.27 MONTHLY AVERAGE Moody's Corporate Bond Yield Average-Monthly
CORPORATES: Average Corporates published by Moody's Investors
Service, or its successor, or a substantially
similar average as may be allowed by law or
regulation.

1.28 NET CONTRIBUTION: A Contribution less any applicable premium taxes.

1.29 NONUNITIZED SEPARATE An account established by Aetna under Section 38a-
ACCOUNT: 433 of the Connecticut General Statutes that holds
assets for GA Account Terms (See 1.18) greater
than three years. The Contract Holder or
Participant does not participate in the investment
gain or loss from the assets held in the
Nonunitized Separate Account. Such gain or loss is
borne entirely by Aetna. Assets in this account
may be charged with liabilities arising out of any
other Aetna business.

1.30 PARTICIPANT: A person who participates in the Plan named on the
cover of this Contract.

1.31 PLAN: The Plan named on the cover of this Contract and
established under Section 403(b) of the Code. The
Plan is not a part of the Contract and Aetna is
not bound by its terms.

1.32 REINVESTMENT: Aetna will mail a notice to the Participant at
least 18 calendar days before a Guaranteed Term's
Maturity Date. This notice will contain the Terms
available during the current Deposit Periods with
their Guaranteed Interest Rate(s) and projected
Matured Term Value. If no specific direction is
given by the Participant prior to the Maturity
Date, each Matured Term Value will be reinvested
in the current Deposit Period for a Guaranteed
Term of the same duration. If a Guaranteed Term of
the same duration is unavailable, each Matured
Term Value will automatically be reinvested in the
current Deposit Period for the next shortest
Guaranteed Term available in the same
classification. If no shorter Guaranteed Term is
available, the next longer Guaranteed Term will be
used. Aetna will mail a confirmation statement to
the Participant, the next business day after the
Maturity Date. This notice will state the
Guaranteed Term and Guaranteed Interest Rate(s)
which will apply to the reinvested Matured Term
Value.

1.33 SEPARATE ACCOUNT: An account, established by Aetna under Section
38a-433 of the Connecticut General Statutes, that
buys and holds shares of the Fund(s) available
under this Contract. Income, gains or losses,
realized or unrealized are credited or charged to
the Separate Account without regard to other
income, gains or losses of Aetna. Aetna owns the
assets held in the Separate Account and is not a
trustee of such amounts. Amounts in the Separate
Account are not generally guaranteed and are held
at market value. The assets of the Separate
Account, to the extent of reserves and other
contract liabilities of the Account, cannot be
charged with other Aetna liabilities.

1.34 FUND TRANSFERS The movement of invested amounts among the
DURING THE available Fund(s); the Fixed Plus Account (if
ACCUMULATION PERIOD: available) and the GA Account (if available),
during the Accumulation Period.

<PAGE>

1.35 VALUATION DATE: The date and time on which a Fund Annuity Unit
Value is calculated. Currently, this calculation
will be determined at the close of business of the
New York Stock Exchange on any normal business
day, Monday through Friday, that the New York
Stock Exchange is open.

1.36 VALUATION PERIOD: The period of time commencing at the end of one
Valuation Date and ending at the end of the next
Valuation Date.

1.37 VARIABLE ANNUITY: An Annuity with payments that vary with the net
investment results of the Funds available during
the Annuity period.

II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------

2.01 CHANGE OF CONTRACT: Only an authorized officer of Aetna may change the
terms of this Contract. Aetna reserves the right
to modify this Contract to meet the requirements
of applicable state and federal laws or
regulations. Aetna will notify the Contract
Holder in writing of any changes.

Aetna may change the tables for determining the
amount of Annuity benefit payments attributable
only to Contributions accepted after the effective
date of change, without Contract Holder consent.
Such a change will not become effective earlier
that twelve months after (1) the effective date of
the Contract, or (2) the effective date of a
previous change. Aetna will notify the Contract
Holder in writing at least thirty days before the
effective date of the change. Aetna may not make
Contract changes which adversely affect the
Annuity benefits attributable to Contributions
already made to the Contract.

2.02 CHANGE OF FUND: The assets of the Separate Account are segregated
by Fund. If the shares of any Fund are no longer
available for investment by the Separate Account
or if in our judgment, further investment in such
shares should become inappropriate in view of the
purpose of the Contract, Aetna may cease to make
such Fund shares available for investment under
the Contract prospectively, or Aetna may
substitute shares of another Fund for shares
already acquired. Aetna may also, from time to
time, add additional Funds. Any elimination,
substitution or addition of Funds will be done in
accordance with applicable state and federal
securities laws. Aetna reserves the right to
substitute shares of another Fund for shares
already acquired without a proxy vote.

2.03 NONPARTICIPATING The Contract Holder, Participants, or
CONTRACT: Beneficiaries will not have a right to share in
the earnings of Aetna.

2.04 PAYMENTS: (a) Aetna will make distributions as directed by
the Participant, unless the Plan requires the
direction of distributions to be determined by
the Contract Holder. Aetna will determined
the amount of payments based on the Individual
Account's Current Value as of the date on
which a request is received in good order at
Aetna's Home Office. Payments will be made
within seven (7) calendar days of receipt of a
written request in good order at Aetna's Home
Office.

<PAGE>

2.04 PAYMENTS (b) Aetna may defer payments: (1) for a period
(CONT'D): of up to six (6) months (unless not allowed
by state law); and (2) as allowed by
federal law.

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 required by such laws. Annuity
tables for legal reserve valuation shall be as
required by state law. Such tables may be
different from Annuity tables used to determine
Annuity payments.

2.06 CONTROL OF CONTRACT: This Contract is designed to fund a plan which
provides for retirement income.

If permitted by the Plan, the Participant
may select the investment option(s) 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. No
distributions will be made from the
Employer Account or the Employee Account
without the Contract Holder's written
direction to Aetna unless otherwise
directed by the Plan. An in-service
transfer pursuant to IRS Revenue Ruling
90-24, may be made only by written
direction from the Contract Holder and
Participant to Aetna, unless otherwise
specified by the Plan. Checks for
in-service transfers will be made payable
only to the acquiring investment provider.

(a) Nontransferable and Nonassignable: This
Contract and any Individual Accounts are
nontransferable and nonassignable, except
to Aetna in the event of a loan, or
pursuant to a "qualified domestic relations
order" as set forth under the Internal
Revenue Code of 1986, as it may be amended
from time to time.

(b) ERISA/REA Requirements: The Contract Holder
shall notify Aetna in writing of the
applicability of 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
distribution is in accordance with the
terms of the Plan.

Distributions: A Participant may apply for
a distribution from his or her Employee
Account or Employer Account. However, the
Contract Holder must certify in writing
that the distribution is in accordance with
the terms of the Plan.

(d) Participant Rights/Employee Account: The
Participant has a nonforfeitable right to
the value of his or her Employee Account
pursuant to the terms of the Plan as
interpreted by the Contract Holder.

<PAGE>

2.06 CONTROL OF CONTRACT (e) Participant Rights/Employer Account: The
(CONT'D): 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.

2.07 DESIGNATION OF The Participant designates a beneficiary with
BENEFICIARY: the employer, pursuant to the terms of the Plan.

2.08 MISSTATEMENTS AND If Aetna finds the age of any payee to be
ADJUSTMENTS: misstated, the correct facts will be used to
adjust payments.

2.09 INCONTESTABILITY: Aetna cannot cancel this Contract because of any
error of fact.

2.10 GRACE PERIOD: This Contract will remain in effect even if
Contributions are not continued except as
provided in 3.17.

2.11 INDIVIDUAL CERTIFICATES: Aetna shall issue certificates to 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.

III. CONTRIBUTIONS, CURRENT VALUE, AND WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------

3.01 LIMITATION ON The Contribution(s) made to the Employee and
CONTRIBUTIONS: Employer Account 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
Contribution(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.

Aetna reserves the right not to accept any
contribution.

3.02 NET CONTRIBUTION(S): The Net Contribution equals the actual
Contribution less any applicable premium tax.
Generally, Aetna will deduct the premium tax
when Annuity benefits are purchased (See Section
V). If Aetna determines that under applicable
state law, it must pay a premium tax when the
Contribution is received, or at any other time,
it may deduct the tax at that time. The Net
Contribution(s) may be allocated among the
following investment options:

(a) The Fixed Plus Account (if available); and
(b) The current Deposit Period(s) for
Guaranteed Terms under the GA Account (if
available); and
(c) The Fund(s) in which the Separate Account
invests.

<PAGE>

3.02 NET CONTRIBUTION(S) Aetna must be told the percentage of all Net
(CONT'D): Contributions to allocate to one or more of the
investment options. Aetna reserves the right to
require a minimum Contribution amount per
Individual Account.

3.03 EXPERIENCE CREDITS: Aetna may apply experience credits under this
Contract. Any such credits will be computed as
decided by Aetna.

3.04 FUND RECORD UNITS: The portion of the Net Contribution(s) applied
to each Fund under the Separate Account will
determine the number of Fund record units
credited to the Individual Account for that
Fund. This number is equal to the Net
Contribution applied to the Fund divided by the
Fund record unit value (See 3.05) for the
Valuation Period in which the Contribution is
received in good order.

3.05 FUND RECORD A Fund record unit value is computed by
UNIT VALUE: multiplying the net return Factor (See 3.06) for
the current Valuation Date by the Fund record
unit value for the previous Date. The dollar
value of a Fund record unit, Separate Account
assets, and Variable Annuity payments may go up
or down due to investment gain or loss.

3.06 FUND NET The net return factor(s) are used to compute all
RETURN FACTORS: Separate Account record units for any Fund. The
net return factor for each Fund is equal to
1.0000000 plus the net return rate.

The net return rate is equal to:

(a) The value of the shares of the Fund held by
the Separate Account at the end of 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

(d) The total value of the Fund record units
and Fund annuity units of the Separate
Account at the start of the Valuation
Period; minus

(e) A Separate Account charge at an annual
effective rate as shown on Contract
Schedule I for Annuity mortality and
expense risks, asset based sales charge and
a daily administrative charge which will
not exceed the amount shown on Contract
Schedule I 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.

<PAGE>

3.07 MARKET VALUE (a) An MVA will be applied to any withdrawal
ADJUSTMENT: from a GA Account Term before the Maturity
Date due to:

(1) A Transfer;
(2) A full or partial withdrawal; 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 in (b).

(b) Market value adjusted amounts will be equal
to the amount withdrawn multiplied by the
following ratio:

x
---
365
(1 + i)
------------------
x
---
365
(1 + j)

Where:

i is the Deposit Period Yield
j is the Current Yield
x is the number of days
remaining, (computed from
Wednesday of the week of
withdrawal) in the Term.

(1) 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 Term.

(2) 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.

(3) 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.

(4) In the event that no U.S. Treasury
Notes which mature in the last three
months of the Term exist, Aetna
reserves the right to use the U.S.
Treasury Notes that mature in a
following quarter.

(d) Full and partial withdrawals as well as
Transfers made within six (6) months after
the Participant's date of death under the
Amount Payable at Death provision (See
3.18) will be the greater of:

<PAGE>

3.07 MARKET VALUE (1) The aggregate MVA amount which is
ADJUSTMENT the sum of all market value adjusted
(CONT'D): amounts calculated due to a
withdrawal of amounts (for
withdrawal or Transfer) from Terms
prior to the end of those Terms. The
aggregate MVA may be either positive
or negative; or

(2) The applicable portion of the
Current Value in the GA Account.

(e) After the six month period, the withdrawal
or Transfer will be the aggregate MVA
amount (i.e., including all MVAs).

(f) 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.

3.08 FUND TRANSFER(S): All or any portion of the Adjusted Current Value
of the Individual Account (subject to the
limitations described below) may be transferred
from any Fund, the Fixed Plus Account (if
available) or the GA Account (if available):

(a) To any Fund; or
(b) To the Fixed Plus Account (if available);
or
(c) To any Guaranteed Term of the GA Account
(if available) with a different
classification available in the Current
Deposit Period.

Transfer requests can be submitted as a
percentage or as a dollar amount. Aetna may
establish a minimum Transfer amount. Within a
Guaranteed Term classification, the amount
transferred will be withdrawn from the oldest
Deposit Period, then from the next oldest, and
so on until the amount requested is satisfied.

Amounts applied to Guaranteed Terms of the GA
Account may not be transferred to the Funds, the
Fixed Plus Account or to another Guaranteed Term
during the Deposit Period or 90 days after the
close of the Deposit Period except for Matured
Term Value(s) during the calendar month
following the Term's Maturity Date.

Transfers from Guaranteed Terms of the GA
Account are subject to the MVA provisions of
3.07.

During each rolling twelve (12) month period, up
to 20% of the Fixed Plus Account value may be
transferred to one or more of the Fund(s),
and/or the GA Account's then-current Deposit
Period. The 20% limit is reduced by any partial
withdrawals, Transfers or amounts taken as a
loan or used to purchase an Annuity during the
twelve (12) month period. Aetna reserves the
right to include amounts paid under 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.

<PAGE>

3.08 FUND TRANSFER(S) The Participant may make an unlimited number of
(CONT'D): Transfers during the Accumulation Period.
Transfers from the GA Account of a Matured Term
Value on or within one calendar month of a
Term's Maturity Date do not count against the
annual Transfer limit.

3.09 LOANS: If loans are included as an option under your
Plan, (see the Contract Schedule) then the
following will apply.

During the accumulation period, loans are
granted (1) as permitted under applicable law;
(2) subject to the terms and conditions of the
loan agreement; and, (3) in accordance with the
following provisions.

(a) Amount available for loan: The amount
available for loan is limited to the vested
Individual Account Current Value
attributable to Participant contributions,
plus any amounts allowed by the employers
plan. Amounts available from some
investment options may be subject to
limitations specified in the loan
agreement. To obtain the loan amount
requested, these limitations may require
the Participant to transfer funds. A
Market Value Adjustment may apply to
amounts transferred.

For plans subject to ERISA, the minimum
loan amount is $1,000. For plans not
subject to ERISA, the minimum loan amount
is defined in the loan agreement. The
maximum loan amount is the lesser of:

(1) Fifty percent (50%) of the vested
Individual Account Current Value,
including any Loan Account, reduced
by the amount of any outstanding
loan balance on the Loan Effective
Date; or

(2) Fifty thousand dollars ($50,000)
reduced by the highest outstanding
loan balance for the preceding 12
months.

The amount of all outstanding loans cannot
exceed $50,000.

(b) Loan Interest Rate: A Loan Interest Rate is
set on the first business day of each
month. For each loan, the Initial Loan
Interest Rate is the rate for the calendar
month in which the Loan Effective Date
occurs. The initial Loan Interest Rate is
effective for a period of not less than
three months and not more than one year.
The period is specified in the loan
agreement. For each period, the Loan
Interest Rate is adjusted if the new rate
is at least 0.5% higher or lower than the
previous rate. The Participant will
receive reasonable notification of any
change to the Loan Interest Rate. As
applicable, the Loan Interest Rate is:

(1) Plans subject to ERISA: equal to the
Monthly Average Corporates for the
calendar month beginning two months
before the Loan Interest Rate is
effective.

(2) Plans not subject to ERISA: not
greater than 8% on an annual basis.

<PAGE>

3.09 LOANS (c) Earned interest: The Loan Account is
(CONT'D): credited with interest at a rate which is
not less than the Loan Interest Rate, less
3%, on an annual basis.

(d) Loan repayment: Repayment is as set forth
in the loan agreement, or a Participant may
repay a loan in full at any time.

(e) Amount available for partial surrender
while a loan is outstanding: While a loan
is outstanding, the amount available for
partial surrender is equal to the vested
Individual Account Current Value, including
the Loan Account, minus 125% of the
outstanding loan balance.

(f) Full surrenders while a loan is
outstanding: If the Participant requests a
full surrender from the vested Individual
Account Current Value while a loan is
outstanding, one of the following occurs:

(1) If the amount of the vested
Individual Account Current Value
available for distribution is
sufficient to repay (a) the
outstanding loan balance, plus (b)
any applicable Fixed Plus Account
default charge, and (c) any
Surrender Fee due on the outstanding
loan balance, that amount, minus the
Loan Account balance, is deducted
from the vested Individual Account
Current Value and the loan is
canceled.

(2) If the amount of the vested
Individual Account Current Value
available for distribution is not
sufficient to repay (a) the
outstanding loan balance, plus (b)
any applicable Fixed Plus Account
default charge, and (c) any
Surrender Fee due on the outstanding
loan balance, the surrender amount
cannot exceed the vested Individual
Account Current Value, including the
Loan Account, reduced by 125% of the
outstanding loan balance.

(g) Electing an annuity option while a loan is
outstanding: Before all or any portion of
the vested Individual Account Current Value
is applied to an Annuity Option, the
Participant may repay any outstanding loan
balance, or the vested Individual Account
Current Value is adjusted as described in
(f).

(h) Death of the Participant while a loan is
outstanding: If a death benefit claim is
submitted for an Individual Account with an
outstanding loan, the Individual Account
Current Value, including the amount of the
Loan Account, is reduced by the amount of
the outstanding loan balance before the
death benefit amount is determined.

(i) Loan payment default: If Aetna does not
receive a loan payment when due, the
defaulted payment is treated as follows:

<PAGE>

3.09 LOANS (1) If the amount of the vested
(CONT'D): Individual Account Current Value
available for distribution is
sufficient to repay (a) the amount
of the defaulted payment, plus (b)
any applicable Fixed Plus Account
default charge, and (c) any
Surrender Fee due on the defaulted
payment, that amount is deducted
from the vested Individual Account
Current Value.

(2) If the amount of the vested
Individual Account Current Value
available for distribution is not
sufficient to repay (a) the amount
of the defaulted payment, plus (b)
any applicable Fixed Plus Account
default charge, and (c) any
Surrender Fee due on the defaulted
payment, until such time that the
amount due can be distributed, the
Loan Account continues to earn
interest, and interest is charged on
the defaulted payment. At that
time, the amount due is surrendered
from the vested Individual Account
Current Value.

3.10 NOTICE TO THE Each year, Aetna will notify the Participant of:
PARTICIPANT:
(a) The value of any amounts held in:

(i) The Fixed Plus Account (if
available),
(ii) The GA Account (if available),
(iii) The Fund(s) for the Separate
Account;
(b) The number of any fund(s) record units;
(c) The fund(s) record unit value(s);
(d) The amount available for withdrawal; and
(e) The Loan Account value.
This information will be as of a date no more
than sixty (60) days before the date of the
notice.

3.11 WITHDRAWAL Limitations apply to withdrawals of any
RESTRICTIONS: Restricted Amount from this Contract, as
required by Code Section 403(b)(11). The
Restricted Amount is the sum of:

(a) Net Contributions attributable to
Participant salary reduction contributions
made on and after January 1, 1989 if any;
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.

<PAGE>

3.11 WITHDRAWAL A full or partial withdrawal is also allowed if
RESTRICTIONS the Participant incurs a "hardship" as that term
(CONT'D): 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 Contributions
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
withdrawal 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 IRS Revenue Ruling 90-24, Aetna
agrees to accept under this Contract 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). Such amounts will not
be subject to the withdrawal restrictions set
forth in Code Section 403(b)(11).

3.12 MANNER AND TIMING (a) As the Plan allows, a distribution to a
OF DISTRIBUTIONS: Participant may be made in a lump sum, as
one of the Distribution Options described
in Section IV, or as one of the Annuity
options in Section V. The Participant may
elect the form of distribution subject to
certification in writing by the Contract
Holder that the Participant is eligible
both as to the timing and form of
distribution.

(b) The distribution of benefits from the
Employee and Employer Accounts must begin
by April 1 of the calendar year following
the calendar year in which the Participant
attains age 70 1/2 or in the case of a
governmental or church plan the year in
which the Participant attains age 70 1/2 or
retires, whichever occurs later.

(c) If the Participant does not request
commencement of benefits from the Employee
and Employer Accounts as described above,
Aetna will not be responsible for
compliance with the Code Section 401(a)(9)
minimum distribution requirements or for
any adverse tax or other consequences that
may result.

3.13 WITHDRAWAL: (a) The Participant may withdraw any portion or
all of an Individual Account Adjusted
Current Value and transfer such amount to
another investment provider under the Plan.
The withdrawal and transfer request must be
submitted in writing to Aetna.

(b) Except as described in Section 3.14, unless
the Participant specifies otherwise,
partial withdrawals are satisfied by
withdrawing amounts on a pro rata basis
from each of the investment options in
which the Individual Account is invested.

<PAGE>

3.13 WITHDRAWAL (c) When amounts are withdrawn from the GA
(CONT'D): Account, amounts in Short-Term and
Long-Term Classifications are treated as
separate investment options and amounts are
taken on a pro rata basis. Within a
Classification, amounts will be withdrawn
starting with the Term still in effect with
the oldest Deposit Period.

(d) Any amount withdrawn from the Fixed Plus
Account will be subject to the limitations
in 3.14, 3.15 and 3.16.

3.14 PARTIAL WITHDRAWAL The amount eligible for partial withdrawal is
FROM THE FIXED PLUS 20% of the Current Value of the amount held in
ACCOUNT: the Fixed Plus Account on the day Aetna's Home
Office receives a written request, reduced by
any previous Transfer, partial withdrawal or
amounts taken as a loan or used to purchase
Annuity benefits during the prior 12 months.
Aetna reserves the right to include amounts paid
under ECO and SWO for purposes of applying this
20% limit. However, SWO is unavailable if a
Fixed Plus Account Transfer or withdrawal is
requested within the current 12 month period.

The 20% limit applicable to partial withdrawals
from the Fixed Plus Account will be waived under
certain conditions and will apply when the
partial withdrawal is made on a pro rata basis
from all options used under the Participant's
Individual Account. (See Contract Schedule I).

3.15 PAYMENT OF FIXED When Aetna receives a full withdrawal request,
PLUS ACCOUNT FULL no additional partial withdrawals or Transfers
WITHDRAWAL: from the Fixed Plus Account are permitted during
the payout period. If a full withdrawal is
requested, Aetna will pay any Current Value from
the Fixed Plus Account in five payments as
follows:

(a) 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 that was
transferred, withdrawn or used for a loan
or to purchase Annuity benefits during the
prior 12 months;
(b) One-fourth of the remaining Current Value
12 months later;
(c) One-third of the remaining Current Value 12
months later;
(d) One-half of the remaining Current Value 12
months later; and
(e) The balance of the Current Value 12 months
later.

The Fixed Plus Account full withdrawal payment
provision will be waived when a withdrawal is:

(a) Due to the Participant's death before
Annuity benefit payments begin;
(b) Used to purchase Annuity benefits; or
(c) When the amount in the Fixed Plus Account
is $3,500 or less and no amount has been
withdrawn, transferred, taken as a loan or
used to purchase Annuity benefits during
the previous 12 months.

Any full withdrawal from the Fixed Plus Account
may be cancelled at any time before the end of
the payment period.

<PAGE>

3.16 PAYMENT OF MINIMUM If the Individual Accounts Current Value is less
CURRENT VALUE: than $3,500, and no Contributions have been
received for three (3) years, Aetna may close
the Account and pay the Current Value to the
Contract Holder in one lump sum.

3.17 AMOUNT PAYABLE AT Aetna will pay any portion of the Individual
DEATH (BEFORE ANNUITY Account(s) Current Value, to the Beneficiary
PAYMENTS START): when:

(a) The Participant dies before Annuity
payments start; and
(b) The certified copy of the death certificate
is received by Aetna.

A guaranteed death benefit is available if the
Beneficiary requests either a lump-sum payment
or an Annuity option within six months of the
Participant's death.

For each Individual Account, the death benefit
is guaranteed to be the greater of:

(a) The Current Value of the Individual Account
plus aggregate positive MVA, as applicable,
on the date the notice of death and the
request for payment are received in good
order at Aetna's Home Office; or

(b) The total of Net Contribution(s) made to
the Individual Account minus the total of
all partial withdrawals, annuitizations
made from the Individual Account and any
amount allocated from the Individual
Account to the Loan Account.

If the payee of the death proceeds is the
Participant's surviving spouse, 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 Beneficiary is not
the surviving spouse, all of the Current Value
must either be applied to an Annuity option
within one (1) year of the Participant's death
or be paid to the payee within five (5) years of
the Participant's death (see Part V).

In no event may any payments to the 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 specified 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.

Amounts in the GA Account will be payable as
described in Section 3.07(d).

<PAGE>

3.18 REINSTATEMENT: All or a portion of the proceeds of a full
withdrawal of an Individual Account may be
reinvested within 30 days after the surrender if
allowed by law. Any Market Value Adjustment
deducted from GA Account withdrawals will not be
included in the reinstatement. Amounts will be
reinstated among the Fixed Plus Account, GA
Account, and the Fund(s) in the same proportion
as they were at the time of withdrawal. Any
amount 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 Individual Account(s) closed because the
Current Value was less than $3,500 may not be
reinstated (see 3.17).

A Reinstatement is permitted only once per
Individual Account.

IV. NON-ANNUITY DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------

4.01 DISTRIBUTION OPTIONS: Distribution Options: ECO, LEO and SWO are
distribution options under which a portion of
the Individual Account Current Value will
automatically be surrendered and distributed
each calendar year. The distributed amount is
withdrawn pro rata from each investment option
under the Individual Account.

Surrender Fee/Market Value Adjustment: A
Surrender Fee will not be deducted from any
portion of the Current Value which is paid under
ECO, LEO or SWO. A Market Value Adjustment will
not be applied to any portion of the Current
Value which is paid under ECO.

Minimum Current Value: At its discretion, Aetna
may require a minimum initial Current Value for
election of a Distribution Option. If after
election of the option the Current Value is
insufficient to make a scheduled payment, Aetna
will distribute the entire Individual Account
balance.

Reservations of Rights: Aetna reserves the right
to change the terms of ECO, LEO or SWO for
future elections, to discontinue the
availability of these options after proper
notification, or to make other distribution
options available as allowed by the state in
which this Contract is delivered. Aetna also
reserves the right to allow ECO and LEO payments
to be made more frequently than annually.

Election and Revocation: The Participant or
Beneficiary may elect a Distribution Option by
submitting a completed and signed election form
to Aetna's Home Office. If the Individual
Account is subject to ERISA, the Participant
must also submit to Aetna a waiver and spousal
consent satisfying the requirements of ERISA
Section 205.

<PAGE>

4.01 DISTRIBUTION OPTIONS Once elected, the Participant or Beneficiary may
(CONT'D): revoke the option by submitting a written
request to Aetna's Home Office. Any revocation
will apply only to amounts not yet paid.

Availability of ECO, LEO and SWO: The
Participant may elect any one of the following
three distribution options, if permitted under
the terms of the Plan. The Beneficiary may elect
either ECO or SWO, if permitted under the terms
of the Plan.

An individual who has revoked ECO, LEO or SWO
may not subsequently elect that option again,
nor may the individual elect another withdrawal
option unless permitted under the Code minimum
distribution rules.

LEO and SWO are not available if there is an
outstanding loan under the Individual Account,
or if a Fixed Plus Account transfer or surrender
has occurred within the prior 12 month period.
Payments will cease if a loan is granted while
LEO or SWO is in effect.

If LEO is in effect and the Participant dies, or
if ECO or SWO is in effect and the Participant
dies before the required beginning date for
minimum distributions, payments will cease. A
Beneficiary may elect ECO or SWO provided the
election satisfies the Code minimum distribution
rules.

If ECO or SWO is in effect and the Participant
dies after the required beginning date for
minimum distributions, payments will continue as
permitted under the Code minimum distribution
rules, unless revoked.

4.02 ESTATE CONSERVATION Amount of Distribution: Each year that ECO is in
OPTION: 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 Current Value as of December
31 of the year prior to the year for which
payment is to be made by a life expectancy
factor based on expected return multiples in
Table V and VI of Section 1.72-9 of the Income
Tax Regulations.

If Aetna maintains separate records of the value
as of December 31, 1986, payments made during or
after the year in which the Participant attains
age 70 1/2 and before the year the Participant
attains age 75, will only be calculated on
amounts contributed after December 31, 1986,
plus all earnings on all amounts after that
date.

The Participant may elect either the single or
joint life expectancy factor. If the joint life
expectancy factor is elected, the second life
must be the Beneficiary under the Plan. If the
Beneficiary selects ECO after the Participant's
death, only a single life expectancy factor may
be used. The life expectancy or joint life
expectancy factor will be recalculated each year
in accordance with the rules under Code Section
401(a)(9).

23
<PAGE>

4.02 ESTATE CONSERVATION Date of Distribution: The Participant shall
OPTION (CONT'D): 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
or, for plans of government or church employers,
the date the Participant retires, whichever is
later. If a Beneficiary elects ECO, the earliest
date is the date of the Participant's death.
Subsequent distribution will be made annually on
such date as Aetna may designate or allow.

4.03 LIFE EXPECTANCY Amount of Distribution: Each year that LEO is in
OPTION: effect, Aetna will calculate and distribute an
amount determined by dividing the Individual
Account Current Value as of December 31 of the
year prior to the year for which payment is to
be made by a life expectancy factor based on
expected return multiples in Table V and VI of
Section 1.72-9 of the Income Tax Regulations.
Payments will be made each year until the year
the Participant attains age 70 1/2, or until the
Participant dies, if earlier.

The Participant may elect either the single or
joint life expectancy factor. If the joint life
expectancy factor is elected, the second life
must be the Beneficiary under the Plan. The life
expectancy or joint life expectancy factor will
be recalculated each year in accordance with the
rules under Code Section 401(a)(9), or reduced
by one for each calendar year which has elapsed
since the life expectancy was first calculated,
as elected by the participant.

Date of Distribution: The Participant shall
specify the initial distribution date. The
earliest date is the date on which the
Participant separates from service with the
employer. Subsequent distribution will be made
annually on such date as Aetna may designate or
allow.

4.04 SYSTEMATIC WITHDRAWAL Amount of Distribution: The Participant may
OPTION: elect one of the three payment methods described
below.

(1) Specified Payment: Payments of a designated
dollar amount. The annual amount may not
be greater than the percentage of the
Current Value at time of election as shown
in Contract Schedule I. This annual dollar
amount will remain constant, unless a
higher amount is required under Code
minimum distribution rules. At its
discretion, Aetna may require a minimum
initial payment amount; or

(2) Specified Period: Payments which are made
over a period of time which must be at
least the minimum number of years shown in
Contract Schedule I. The annual amount paid
each year is calculated by dividing the
Current Value as of December 31 of the
prior year by the number of payment years
remaining; or

(3) Specified Percentage: Payment of a
designated percentage which cannot be
greater than the percentage of the Current
Value at the time of election as shown in
Contract Schedule I. The percentage may be
changed by written request. Aetna reserves
the right to limit the number of times the
percentage may be changed. The annual
amount is calculated by

<PAGE>

4.04 SYSTEMATIC WITHDRAWAL multiplying the Current Value as of December 31
OPTION (CONT'D): of the year prior to the payment by the
designated percentage. Payments will be made
each year until the year the Participant attains
age 70 1/2.

Minimum Distribution Requirements: If
distributions are made under SWO after payments
are required to begin under the minimum
distribution requirements of Code Section
401(a)(9), the amount distributed in any year
will be increased if required under the Code
minimum distribution rules. For this purpose,
the minimum required distribution will be
determined each year by dividing the Individual
Account Current Value as of December 31 of the
year prior to the year for which payment is to
be made by a life expectancy factor, which for
the initial distribution year shall be based on
either the single life expectancy factor or
joint life expectancy factor in Table V or VI of
Section 1.72.9 of the Income Tax Regulations, as
elected by the Participant. If the joint life
expectancy factor is elected, the second life
must be the Beneficiary under the Plan.

If a Beneficiary elects SWO after the
Participant's death, only a single life
expectancy factor may be used. Minimum
distributions for any subsequent year will be
calculated based on such life expectancy factor
reduced by one for each calendar year which has
elapsed since the life expectancy was first
calculated.

If the specified period method is elected, the
maximum specified period will be limited by the
single life expectancy factor or joint life
expectancy factor in Table V or VI of Section
1.72-9 of the Income Tax Regulations, as elected
by the Participant. If elected by a Beneficiary,
only a single life expectancy may be used.

Date of Distribution: The Participant shall
specify the initial distribution date. The
earliest date is the date on which the
Participant attains age 59 1/2 or age 55, if
separated from service with the employer at or
after age 55. If a Beneficiary elects SWO, the
earliest date is the date of the Participant's
death.

SWO payments will be made on a monthly,
quarterly, semi-annual or annual basis, as
elected by the Participant or Beneficiary. If
SWO payments are made more frequently than
annually, the designated annual amount is
divided by the number of payments due each
calendar year. Subsequent distribution will be
made periodically on such date as Aetna may
designate or allow.

<PAGE>

V. ANNUITY PROVISIONS
- --------------------------------------------------------------------------------

5.01 CHOICES: (a) The Participant may elect an Annuity option
by telling Aetna to pay all or any portion
of the Individual Account(s) Current Value
(minus any applicable premium tax if not
previously deducted) as a premium for an
Annuity under option 1, 2, or 3 (See 5.07).
A completed and signed election form must
be submitted to the Home Office. The form
must include Contract Holder certification
that the Participant is eligible for a
distribution under the terms of the Plan
and that the Annuity option chosen is
permitted under the terms of the Plan. Any
election of an Annuity option must comply
with the minimum distribution requirements
of Code Section 401(a)(9), including the
incidental death benefit rule, and the
regulations thereunder. This restriction
does not apply if option 3 is chosen and
the second Annuitant is the spouse of the
Participant.

(b) Generally, the first Annuity payment must
be made by April 1 of the calendar year
following the year in which the Participant
turns age 70 1/2 or in the case of a
governmental or church plan the year in
which the Participant attains age 70 1/2 or
retires, whichever occurs later.

(c) When an Annuity option is chosen the
Participant must designate whether the
Annuity will be Fixed or Variable and
whether the underlying investment will be:

(1) The General Account;
(2) One or more of the available
Fund(s); or
(3) A combination of (1) and (2).

If a Fixed Annuity is chosen, the Annuity
purchase rate for the option chosen
reflects at least the Minimum Guaranteed
Interest Rate (See Contract Schedule II),
but may reflect a higher interest rate.

If a Variable Annuity is chosen, the
initial Annuity payment for the option
chosen reflects the assumed annual return
rate elected (See Contract Schedule II).

(d) Payments will be made on a monthly basis
unless the Participant requests otherwise.

(e) Once elected, an Annuity option may not be
revoked, except for option 1 when elected
on a variable basis.

(f) Upon certification by the employer of the
Participant's total disability, acceptance
of retirement or termination of employment,
the Participant has the right to elect an
Annuity Option. Upon written direction
from the employer, Aetna will pay annuity
benefits directly to the Participant and as
payor, Aetna will be responsible for
withholding any applicable federal or state
taxes and reporting such sums and filing
any related forms with the Internal Revenue
Service and/or to any applicable state

<PAGE>

5.01 CHOICES taxing authorities. In the event of the death of
(CONT'D): the Participant, Aetna will distribute the
accumulated balance of the deceased
Participant's Individual Account, as previously
directed by the electing Participant, or in the
absence of such directions, as directed by the
Participant's beneficiary.

5.02 TERMS OF ANNUITY (a) No choice of any Annuity option may be made
OPTIONS: if the first payment would be less than $50
or if the total payments in a year would be
less than $250.

(b) If a Fixed Annuity under option 1, 2 or 3
is elected and a larger Annuity payment
would result from applying the Adjusted
Current Value to a current Aetna single
premium immediate Annuity, Aetna will make
the larger payment.

Also, if a Fixed Annuity Option is chosen
under Options 1, 2 or 3 (a) or (d), then
the Participant may have the right to elect
an annual increase of 1, 2 or 3%.

(c) For purposes of calculating the guaranteed
first payment of a Variable Annuity or the
payments for a Fixed Annuity, the
Annuitant's and second Annuitant's adjusted
age will be used. The Annuitant's and
second Annuitant's adjusted age is his or
her age as of the birthday closest to the
Annuity commencement date reduced by one
year for Annuity commencement dates
occurring during the period of time from
July 1, 1992 through December 31, 1999.
The Annuitant's and second Annuitant's age
will be reduced by two years for Annuity
commencement dates occurring during the
period of time from January 1, 2000 through
December 31, 2009. The Annuitant's and
second Annuitant's age will be reduced by
one additional year for Annuity
commencement dates occurring in each
succeeding decade.

(d) Assumed Annual Net Return Rate is the
interest rate used to determine the amount
of the first Annuity payment under a
Variable Annuity. The Separate Account
must earn this rate plus enough to cover
the mortality and expense risks charges
(which may include profit) and
administrative charges if future Variable
Annuity Payments are to remain level.

5.03 DEATH PROVISION: When an Annuitant dies under options 1 or 2, the
present value of any remaining guaranteed
payments will be paid in one sum to the
Beneficiary or, upon the election of the
Beneficiary, any remaining payments will
continue to the Beneficiary. If a Beneficiary
dies while receiving Annuity payments, the
present value of any remaining payments will be
paid in one lump sum to the Beneficiary's
estate. The rate used to determine the present
value for a lump sum payment will be the rate
used to determine the first Annuity payment.

<PAGE>

5.04 FUND ANNUITY The number of Fund(s) annuity units is based on
UNITS: 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 5.05) on the tenth
Valuation Date 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 Date prior to the due date
of the payment is used.

5.05 FUND ANNUITY For any Valuation Date, a Fund(s) annuity unit
UNIT VALUE: value is equal to:

(a) The value for the previous Valuation Date;
multiplied by
(b) The Annuity net return factor(s) (See 5.06)
for the Period; multiplied by
(c) A factor to reflect the assumed annual net
return rate. (See Contract Schedule II).

The dollar value of a Fund annuity unit values
and Annuity payments may go up or down due to
investment gain or loss.

Payments shall not be changed due to changes in
the mortality or expense results or
administrative charges.

5.06 FUND ANNUITY NET The Annuity net return factor(s) are used to
RETURN FACTOR: compute all Separate Account Annuity payments
for any Fund.

The Annuity net return factor(s) for each Fund
is equal to 1.0000000 plus the net return rate.

The net return rate is equal to:

(a) The value of the shares of the Fund held by
the Separate Account at the end of a
Valuation Period, minus

(b) The value of the shares of the Fund held by
the Separate Account at the start of the
Valuation Period, plus or minus

(d) The total value of the Fund(s) record units
and Fund(s) annuity units of the Separate
Account at the start of the Valuation
Period; minus

<PAGE>

5.06 FUND ANNUITY NET (e) A daily charge for Annuity mortality and
RETURN FACTOR: expense risks, which may include profit,
(CONT'D): (at the annual rate as shown on Contract
Schedule II) and a daily administrative
charge.

A Net Return Rate may be more or less than 0%.

The value of a share of the Fund is equal to the
net assets of the Fund divided by the number of
shares outstanding.

5.07 FUND TRANSFERS At the request of the Contract Holder or the
DURING THE ANNUITY Participant if permitted under the Plan, all or
PERIOD: any portion of the Current Value may be
transferred from any Fund to any other allowable
Fund. Transfers will be processed as of the
Valuation Date next following when a Transfer
request is received in good order at Aetna's
Home Office. The maximum number of allowable
transfers (during the annuity period) in a
calendar year is shown on the Contract Schedule.

Transfer requests must be expressed as a
percentage of the allocation among the Funds of
the amount upon which the Variable Annuity will
be based, Aetna may establish a minimum transfer
amount.

5.08 ANNUITY OPTIONS: Option 1 -- Payments for a Stated Period of
Time -- An Annuity will be paid for the number
of years chosen (See Contract Schedule II).

If payments for this option are made under a
Variable Annuity, the present value of any
remaining payments may be withdrawn at any time.

Option 2 -- Life Income -- An Annuity will be
paid for the life of the Annuitant. If payments
for this option are made under a Fixed Annuity
then in the event of the Annuitant's death, the
beneficiary(s) will receive a lump sum death
benefit equal to the annuity purchase amount
less any payments that may have been made to the
Annuitant. Aetna may also guarantee payments
for 5 to 30 years if so directed by the
Participant.

Option 3 -- Life Income based upon the lives of
two Annuitants -- An Annuity will be paid during
the lives of the Annuitant and a second
Annuitant. Payments will continue until both
Annuitants have died. When this option is
chosen, a choice of the following must be made:

(a) 100% of the payment to continue after the
first death;

If payments for this option are made under
a Fixed Annuity then in the event of the
Annuitant's death, the beneficiary(s) will
receive a lump sum death benefit equal to
the annuity purchase amount less any
payments that may have been made to the
Annuitant.

(b) 66 2/3% of the payment to continue after
the first death;

29
<PAGE>

5.08 ANNUITY OPTIONS (c) 50% of the payment to continue after the
(CONT'D): first death;

(d) Payments for a minimum of 120 months, with
100% of the payment to continue after the
first death; or

(e) 100% of the payment to continue at the
death of the second Annuitant and 50% of
the payment to continue at the death of the
Annuitant.

Other Options -- Aetna may make other
options available as allowed by the laws of
the state in which this Contract is
delivered.

<PAGE>

OPTION 1

PAYMENTS FOR A STATED PERIOD OF TIME

AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES

Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%

- -------------------------------------------------------------------------------------------------------------
GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL
YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT
- -------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53

</TABLE>

<PAGE>

OPTION 1

PAYMENTS FOR A STATED PERIOD OF TIME

AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES

Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%

- -----------------------------------------------------------------------------------------
MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL
YEARS PAYMENT PAYMENT PAYMENT PAYMENT
- -----------------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
5 18.12 54.19 107.92 213.99
6 15.35 45.92 91.44 181.32
7 13.38 40.01 79.69 158.01
8 11.90 35.59 70.88 140.56
9 10.75 32.16 64.05 127.00
10 9.83 29.42 58.59 116.18
11 9.09 27.18 54.13 107.34
12 8.46 25.32 50.42 99.98
13 7.94 23.75 47.29 93.78
14 7.49 22.40 44.62 88.47
15 7.10 21.24 42.31 83.89
16 6.76 20.23 40.29 79.89
17 6.47 19.34 38.51 76.37
18 6.20 18.55 36.94 73.25
19 5.97 17.85 35.54 70.47
20 5.75 17.22 34.28 67.98
21 5.56 16.65 33.15 65.74
22 5.39 16.13 32.13 63.70
23 5.24 15.66 31.19 61.85
24 5.09 15.24 30.34 60.17
25 4.96 14.85 29.56 58.62
26 4.84 14.49 28.85 57.20
27 4.73 14.15 28.19 55.90
28 4.63 13.85 27.58 54.69
29 4.53 13.57 27.02 53.57
30 4.45 13.30 26.49 52.53

</TABLE>

<PAGE>
OPTION 1

PAYMENTS FOR A STATED PERIOD OF TIME

AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES

Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%

<S> <C> <C> <C> <C>
5 18.74 56.00 111.33 219.98
6 15.99 47.77 94.96 187.64
7 14.02 41.90 83.30 164.59
8 12.56 37.52 74.58 147.35
9 11.42 34.11 67.81 133.99
10 10.51 31.40 62.42 123.34
11 9.77 29.19 58.03 114.66
12 9.16 27.36 54.38 107.45
13 8.64 25.81 51.31 101.39
14 8.20 24.50 48.69 96.21
15 7.82 23.36 46.44 91.75
16 7.49 22.37 44.47 87.88
17 7.20 21.51 42.75 84.48
18 6.94 20.74 41.23 81.47
19 6.71 20.06 39.88 78.80
20 6.51 19.46 38.68 76.42
21 6.33 18.91 37.59 74.28
22 6.17 18.42 36.62 72.35
23 6.02 17.98 35.73 70.61
24 5.88 17.57 34.93 69.02
25 5.76 17.20 34.20 67.57
26 5.65 16.87 33.53 66.25
27 5.54 16.56 32.92 65.04
28 5.45 16.28 32.35 63.93
29 5.36 16.01 31.83 62.90
30 5.28 15.77 31.35 61.95

</TABLE>

<PAGE>

OPTION 2

LIFE INCOME

AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES

Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%

PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS

- ---------------------------------------------------------------------------------------------------
ADJUSTED
AGE OF NONE 60 120 180 240
ANNUITANT
- ---------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
50 $ 4.05 $ 4.05 $ 4.03 $ 3.99 $ 3.93
51 4.12 4.11 4.09 4.05 3.99
52 4.19 4.19 4.16 4.11 4.04
53 4.27 4.26 4.23 4.18 4.10
54 4.35 4.34 4.31 4.25 4.16

55 4.44 4.42 4.39 4.32 4.22
56 4.53 4.51 4.47 4.40 4.29
57 4.62 4.61 4.56 4.48 4.35
58 4.72 4.71 4.65 4.56 4.42
59 4.83 4.81 4.75 4.64 4.49

60 4.95 4.93 4.86 4.73 4.55
61 5.07 5.05 4.97 4.83 4.62
62 5.20 5.17 5.08 4.92 4.69
63 5.34 5.31 5.20 5.02 4.76
64 5.49 5.45 5.33 5.12 4.83

65 5.65 5.61 5.47 5.22 4.89
66 5.82 5.77 5.61 5.33 4.96
67 6.01 5.94 5.75 5.44 5.02
68 6.20 6.13 5.91 5.54 5.08
69 6.41 6.33 6.07 5.65 5.14

70 6.64 6.54 6.23 5.76 5.19
71 6.88 6.76 6.41 5.86 5.24
72 7.14 7.00 6.59 5.97 5.28
73 7.43 7.26 6.77 6.06 5.32
74 7.73 7.53 6.96 6.16 5.35

75 8.06 7.82 7.14 6.25 5.38

</TABLE>

<PAGE>

OPTION 2

LIFE INCOME

AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES

Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%

PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS

<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 are based on mortality from 1983 Table a. The rates do not differ by sex.
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.

<PAGE>

OPTION 2

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

<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 6.93 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>

<PAGE>

OPTION 3

LIFE INCOME FOR TWO PAYEES

AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES

Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%

- ---------------------------------------------------------------------------------------------------------
ADJUSTED AGES
- ------------------------
SECOND
ANNUITANT ANNUITANT OPTION 3a OPTION 3b OPTION 3c OPTION 3d OPTION 3e
- ---------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.69 $ 4.05 $ 4.27 $ 3.69 $ 4.03
55 55 3.88 4.25 4.47 3.87 4.14
55 60 4.06 4.47 4.71 4.06 4.20

60 55 3.99 4.44 4.71 3.98 4.42
60 60 4.24 4.71 4.99 4.23 4.57
60 65 4.49 5.01 5.32 4.48 4.64

65 60 4.38 4.97 5.32 4.38 4.93
65 65 4.72 5.33 5.70 4.71 5.14
65 70 5.07 5.75 6.17 5.05 5.26

70 65 4.93 5.68 6.15 4.91 5.66
70 70 5.40 6.21 6.70 5.36 5.96
70 75 5.89 6.82 7.40 5.81 6.12

75 70 5.69 6.68 7.32 5.62 6.67
75 75 6.37 7.45 8.15 6.23 7.12
75 80 7.07 8.34 9.16 6.78 7.36

</TABLE>

<PAGE>

OPTION 3

LIFE INCOME FOR TWO PAYEES

AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES

Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%

<S> <C> <C> <C> <C> <C> <C>
55 50 $ 3.97 $ 4.35 $ 4.56 $ 3.97 $ 4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48

60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93

65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54

70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40

75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64

</TABLE>

<PAGE>

OPTION 3

LIFE INCOME FOR TWO PAYEES

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%

<S> <C> <C> <C> <C> <C> <C>
55 50 $ 4.88 $ 5.26 $ 5.48 $ 4.88 $ 5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38

60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80

65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41

70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25

75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49

</TABLE>

39
<PAGE>

- --------------------------------------------------------------------------------

A B C

D E F

G H I

AETNA LIFE INSURANCE AND ANNUITY COMPANY
HOME OFFICE: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225

Group Combination Annuity Contract
Nonparticipating

- --------------------------------------------------------------------------------

<PAGE>

AETNA LIFE INSURANCE AND ANNUITY COMPANY

ENDORSEMENT

The Contract and Certificate are endorsed as follows.

Under the heading DEFINITIONS, add the following as the last sentence in the
section titled FUNDS:

Each Aetna GET Fund series is a separate Fund.

Under the heading DEFINITIONS, add the following:

AETNA GET FUND OFFERING PERIOD (OFFERING PERIOD)
The period, usually from one to three months, during which Participants may
transfer or deposit amounts to an Aetna GET Fund series. Each Aetna GET Fund
series has a specified Offering Period. Amounts transferred or deposited
prior to the date on which the Guaranteed Period begins are invested in money
market instruments.

Aetna reserves the right to state the minimum amount a Participant may
transfer or deposit to each Offering Period. Aetna also reserves the right
to extend an Offering Period or accept transfers or deposits to an Aetna GET
Fund series during the series' Guaranteed Period.

AETNA GET FUND GUARANTEED PERIOD (GUARANTEED PERIOD)
For each Aetna GET Fund series, the period for which the Aetna Get Fund
Guarantee applies. The Guaranteed Period ends on the Maturity Date.

AETNA GET FUND MATURITY DATE (MATURITY DATE)
The date on which a series' Guaranteed Period ends and GET Fund Record Units
for the series are liquidated.

In SECTION III. CONTRIBUTIONS, CURRENT VALUE AND WITHDRAWAL PROVISIONS, add the
following:

AETNA GET FUND OFFERING PERIOD
Aetna will specify a minimum total asset amount required at the end of an
Offering Period to offer a Aetna GET Fund series. If the minimum is not
achieved, Aetna reserves the right to not start the Guaranteed Period.

If an Aetna GET Fund series is terminated, Aetna will send written
notification of the termination to all Participants who have made transfers
or deposits to that Aetna GET Fund series. Notice will be mailed no later
than 15 calendar days after the end of the Offering Period. Participants
then have 45 days from the end of the Offering Period to redirect amounts in
the terminated Aetna GET Fund series to one or more investment options
available under the Contract. During this time, funds are invested in money
market instruments. If no election is made by the end of the 45-day period,
at the next Valuation Period, Aetna will transfer the amount in the
terminated Aetna GET Fund series to the [Aetna Variable Encore Fund].

Aetna reserves the right to specify a maximum total asset amount for an Aetna
GET Fund series. If the maximum is achieved, Aetna also reserves the right
to set a date on which it will stop accepting transfers or deposits for that
Aetna GET Fund series. Aetna will announce the date on which it will stop
accepting transfers and deposits ten calendar days prior to that date.

<PAGE>

AETNA GET FUND GUARANTEE
On the Maturity Date of each Aetna GET Fund series, the GET Fund Record Unit
Value for that series will not be less than the GET Fund Record Unit Value
determined at the beginning of the Guaranteed Period. If necessary, Aetna
will transfer funds from its General Account to the Aetna GET Fund series to
offset any shortfall in the GET Fund Record Unit Value. The Aetna GET Fund
Guarantee does not apply to withdrawals or transfers made before the Maturity
Date.

AETNA GET FUND MATURITY DATE
Prior to the Maturity Date for each Aetna GET Fund series, Aetna sends a
written notice of the date to all Participants who have Current Value in that
series. Participants must then inform Aetna of the investment option(s) to
which to transfer that Current Value. If a Participant does not make an
election, on the Maturity Date Aetna will transfer the Current Value to the
then available Aetna GET Fund series' Offering Period. If no Offering Period
is available, Aetna will transfer 50% of the amount to the [Aetna Variable
Fund] and 50% to the [Aetna Income Shares].

Add the following subsection to the section titled FUND NET RETURN FACTORS:

(f) Minus a fee for the Aetna GET Fund Guarantee which is deducted daily
during the Guaranteed Period. The fee, which is determined prior to the
beginning of each series' Offering Period, is as shown on Contract
Schedule I.

Add the following as the fifth paragraph to the section titled TRANSFER(S):

A transfer or withdrawal from an Aetna GET Fund series before the Maturity
Date will be based on the GET Fund Record Unit Value for the next Valuation
Period following the date on which Aetna receives a transfer request in good
order at its home office.

Add the following as the third paragraph to the section titled REINSTATEMENT:

Amounts attributable to an Aetna GET Fund series will be reinstated to the
current Offering Period of the Aetna GET Fund series. If no Aetna GET Fund
series Offering Period is available, amounts withdrawn from the Aetna GET
Fund series will be allocated, pro rata, among all other investment options
in which the Individual Account is invested.

Add the following as the second sentence to the section titled CHOICES:

The Participant must transfer any portion of the Current Value held in an
Aetna GET Fund series to another investment option before an Annuity option
is elected.

On CONTRACT SCHEDULE I, add the following under the heading SEPARATE ACCOUNT:

CHARGE FOR AETNA GET FUND GUARANTEE
The daily charge for the Aetna GET Fund Guarantee will be at an annual rate
of [0.25%]

Endorsed and made part of the Contract or Certificate on the Effective Date.

/s/ Daniel P. Kearney

President
Aetna Life Insurance and Annuity Company

<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.

/s/ KPMG Peat Marwick LLP

Hartford, Connecticut
August 5, 1996

<PAGE>

August 6, 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. 6 to the Registration Statement on
Form N-4
File Nos. 33-91846* 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.
6 to the Registration Statement on Form N-4 (File No. 33-91846) and to my being
named under the caption "Legal Matters" therein.

Very truly yours,

/s/ Susan E. Bryant

Susan E. Bryant
Counsel
Aetna Life Insurance and Annuity Company

_______________

* 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 a
prospectus relating to the securities covered by the following earlier
Registration Statement: 33-75976.